Mr Reid, who has acted as a troubleshooter for No 10 during Mr Blair's ten years in power, said he would not stand for the Labour leadership because his party want "to unite rather than to fracture".
As a result, he explained, it would be better for him to stand down and allow chancellor Gordon Brown – almost certainly Mr Blair's successor – "maximum flexibility" in terms of introducing new cabinet ministers.
"I intend to stand down from the Cabinet towards the end of June when Tony goes," he said.
"In my view it is better for the Labour party, the leadership and the new prime minister that he be given the maximum flexibility in terms of introducing his new ideas, a new agenda - the same direction but new policies perhaps - in pursuit of that… a fresh start."
He denied the suggestion that Mr Brown would deny him a continuing role in government, saying the main personal motivation for his decision was to get some time off.
"It is better from my point of view, having had nine jobs in the last ten years, to recharge my batteries," he said.
Mr Reid's ten years in power has included spells as secretaries of state for health, defence, transport, Scotland and Northern Ireland, as well as a brief stint as leader of the House.
His wide-ranging experience in government meant he had been touted as a potential challenger to Mr Brown before his arrival at the trouble-ridden Home Office.
But a series of negative revelations about the department – including its difficulties dealing with sex offenders, overflowing prisons and foreign prisoners – saw his political stock fall.
Declaring the department "not fit for purpose", Mr Reid split the Home Office into two, creating a new Ministry of Justice headed by the lord chancellor taking responsibility for criminal justice, prisons and probation, and a new Home Office focussing on terrorism, security and immigration.
He has now revealed that these reforms will be his last major act as a minister before returning to the backbenches.
"What I intend to do is vote and support Gordon Brown, to put through the changes to the Home Office and then to stand down as Tony Blair goes from the cabinet… to give the maximum opportunity to Gordon to bring in fresh talent and newer people," he said.
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