The Archbishop of Canterbury Rowan Williams is to step down from his position to become Master of Magdalene College, Cambridge.
UPDATE: Archbishop of York John Sentamu front-runner to replace Williams
In a statement Lambeth Palace said: "Archbishop Rowan Williams has today announced his acceptance of the position of Master of Magdalene College, Cambridge with effect from January 2013.
"He will therefore be stepping down from the office of Archbishop of Canterbury at the end of December 2012. Dr Williams’ intentions have been conveyed to The Queen, who is Supreme Governor of the Church of England and who formally appoints the Archbishop of Canterbury."
Dr Williams said: “It has been an immense privilege to serve as Archbishop of Canterbury over the past decade, and moving on has not been an easy decision.
"During the time remaining there is much to do, and I ask your prayers and support in this period and beyond."
He added later: "I would like the successor that God would like."
"I think that it is a job of immense demands and I would hope that my successor has the constitution of an ox and the skin of a rhinoceros, really."
The 61-year-old will continue to carry out all the duties and responsibilities of the Archbishop of Canterbury, both for the Church of England and the Anglican Communion, until the end of the year.
The Crown Nominations Commission will consider in due course the selection of a successor.
Chief Rabbi Jonathan Sacks said he had served the Church "with great distinction." "It has been an honour to work alongside him over the past decade and I consider it a particular privilege to call him not just a valued colleague in faith, but a true friend."
Prime Minister David Cameron wished him well for the future, saying: “I would like to thank Rowan Williams for his dedicated service as Archbishop of Canterbury. As a man of great learning and humility he guided the church through times of challenge and change."
Ed Miliband, whose chief of staff Tim Livesey used to work for Williams, paid tribute to the priest saying: "Rowan Williams rightly is held in the greatest respect nationally and internationally. He has been an outstanding leader of the church in England and in the wider Anglican Communion in challenging times. He has friends on every continent, and has played a vital role in building friendships across faiths and denominations."
Deputy Prime Minister Nick Clegg said Williams made an "invaluable" contribution to public life.
“I have always enjoyed our conversations, particularly in areas of common interest – tackling the stigma of mental health, the reform of our penal system, creating a fair asylum system and promoting human rights.
“I wish him all the best in his new role.”
Williams recently attacked the "feverish advertising culture" that fuels "unreal and disproportionate desires" as he joined the Pope for evening prayer in Rome.
He has also caused political controversy, most recently in an article for the New Statesman where he questioned the coalition government's mandate and said their policies caused "anxiety and anger".
His tenure has been marked by a bruising war between liberals and traditionalists in the Church of England and the wider Anglican Communion over the issue of homosexuality.
The Times reports sources close to Williams claiming he grew increasingly frustrated on the issue of gay bishops.
He had said before his enthronement as Archbishop of Canterbury that he could "see a case" for acknowledging faithful same-sex relationships, raising hopes among liberals of a relaxation of traditional church teaching on the subject.
But these hopes were dashed in 2003 in the row over the nomination of Jeffrey John, a gay but celibate clergyman, as bishop of Reading.
Dr John, who is now Dean of St Albans, was forced to withdraw his acceptance of the post, and Dr Williams went on to acknowledge the "pain" the furore had caused within the Church, saying he had been taken aback by the strength of the reaction.
He officiated at Prince William and Kate Middleton's wedding in April 2011.