Mr Nuttall, who was viewed as one of the favourites to succeed Mr Farage, said he had achieved his objectives following the Brexit vote. The Press Association reported.
The North West England MEP said he would keep his seat in the European Parliament to “hold the Government’s feet to the fire” during the talks on leaving the EU.
Speaking at the party’s North West conference in Liverpool, he said: “I have been at the forefront of the campaign to leave the European Union for a decade now, and I believe I can step aside with my objective achieved and my head held high.
“I would like to thank all of those who have supported Ukip over the years and who will continue to do so.
“I will stay in my role as deputy leader of the party until our national conference, when I will stand down from that role.
“I will however remain leader of the Ukip delegation of MEPs in the European Parliament so that I can continue to hold the Government’s feet to the fire during the Brexit negotiations.”