The 79-year-old Swiss has called an extraordinary congress “as soon as possible”, saying “a new president will be elected to follow me”.
Blatter’s announcement comes after FIFA has admitted it paid 10million US dollars destined for the South Africa World Cup to an account controlled by the disgraced former vice-president Jack Warner.
The payment followed a letter from the South African FA to FIFA secretary general Jerome Valcke – the money is being investigated as a World Cup votes bribe by the FBI.
Blatter said in a video message played at a news conference in Zurich: “While I have a mandate from the membership of FIFA, I do not feel that I have a mandate from the entire world of football – the fans, the players, the clubs, the people who live, breathe and love football as much as we all do at FIFA.
“Therefore, I have decided to lay down my mandate at an extraordinary elective congress. I will continue to exercise my functions as FIFA president until that election.”
That election is to take place at between December and March and Blatter will remain in position until then.
Blatter added: “I will urge the executive committee to organise an Extraordinary Congress for the election of my successor at the earliest opportunity. This will need to be done in line with FIFA’s statutes and we must allow enough time for the best candidates to present themselves and to campaign.
“Since I shall not be a candidate, and am therefore now free from the constraints that elections inevitably impose, I shall be able to focus on driving far-reaching, fundamental reforms that transcend our previous efforts. For years, we have worked hard to put in place administrative reforms, but it is plain to me that while these must continue, they are not enough.”
Blatter announced that he wants to see FIFA organise integrity checks of all executive committee members, and term limits, including for future presidents, saying he had been blocked in his attempts to introduce those reforms.
He added: “The executive committee includes representatives of confederations over whom we have no control, but for whose actions FIFA is held responsible. We need deep-rooted structural change.
“The size of the executive committee must be reduced and its members should be elected through the FIFA congress. The integrity checks for all executive committee members must be organised centrally through FIFA and not through the confederations.
“We need term limits not only for the president but for all members of the executive committee. I have fought for these changes before and, as everyone knows, my efforts have been blocked. This time, I will succeed.”
Blatter’s announcement is sure to create uncertainty over the 2018 and 2022 World Cups, which are being hosted by Russia and Qatar respectively.
A Swiss criminal investigation is investigating the bids for the two tournaments, while the report from US attorney Michael Garcia’s investigation into bidding has yet to be published in full.
Prince Ali Bin Al Hussein of Jordan, beaten by Blatter in the first round of last week’s presidential election by 133 votes to 73, hinted he may stand again.
He told CNN: “I think this is the right move from Sepp Blatter and I think we have to look to the future.
“I am always there to serve football and I think that’s the most important thing and to do so much work to fix this organisation in a proper way.
“I am at the disposal of our national associations. I don’t want to be somebody who kicks somebody in the knees. At the end of the day I will do my part to help the national associations.”