In a press conference on Tuesday lunchtime, the Social Democrat (SPD) mayor told journalists there would be a referendum on Berlin's bid to host the summer Olympics in 2024 before confirming rumours of his resignation at the end of a 13-year stint at the helm of the capital.
"Political offices get passed on when the time comes," Wowereit said. "I'm leaving voluntarily, and I'm proud to have made my contribution to the positive development of this city."
"This was not an easy decision for me to make," a tearful Wowereit continued. "I've spent over 30 years in politics for this city, and I'm very thankful for that time since I'm one of those people who have made their hobby into their career."
Wowereit, 60, was first elected in October 2001 and has been leading an SPD/CSU coalition in the city Senate since elections in autumn 2011. He became one of the first leading politicians to come out during a campaign, telling an SPD party conference: "I'm gay, and that's just fine."
Christian Lindner, head of the opposition Free Democrats, wrote on Twitter on Tuesday: "Wowereit is stepping down, and that's just fine. The mayor's leaving but the chaos and debt remain."
He also coined the famous phrase "poor, but sexy" to describe Berlin in a TV interview.
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But after staking his political reputation on the successful construction of Berlin's new BER airport, his popularity has sunk rapidly. Berlin Brandenburg airport has been an embarrassing disaster for city authorities. It has failed to open since its original launch date in 2012 and is billions of euros over budget.
The airport has also been engulfed by corruption scandals and was taken to court by Air Berlin over the failed opening.
"One of the greatest defeats is that the opening of the BER didn't happen on time ," Wowereit told journalists. "I regret infinitely the fact that it still isn't sorted out."
The mayor also plans to leave his position on the supervising board of the airport project.
Air Berlin share prices jumped immediately after the resignation rumours emerged.
Wowereit lost an important referendum in May to allow construction on the site of the former Tempelhof airport in the south of Berlin.
Sixty-five percent of Berliners voted against the plan, despite Wowereit and the city authorities urging people to vote in favour of development.
And the mayor was drawn into a corruption scandal earlier this year when it emerged that he knew about money his culture senator André Schmitz had stashed away in a Swiss bank account to avoid taxes.
He told the press conference that he had been waiting for the right time to resign.
"I already wanted to do it in July, but then we became world champions," he joked, referring to Germany's success in the football World Cup.
IN PICTURES: The best of Klaus Wowereit
Possible successors include Berlin SPD boss Jan Stöß and SPD leader in the Berlin Senate Raed Saleh, but the party leadership has been taken by surprise by the development.
The centre-right CDU is currently well ahead of the SPD in polling in the capital city with 28 percent support compared to their coalition partner's 21, according to recent polling from the Forsa Institute. The parties' positions have almost switched since the September 2011 elections, when the SPD received over 28 percent of the vote against the CSU's 23.
The CDU might use the opportunity of Wowereit's departure to demand new elections and take control of the town hall for itself.
Green party leader in the Berlin Senate Ramona Pop told Spiegel that she, too, would be calling for new elections.
SEE ALSO: Wowereit - the mayor Berliners deserve?