"I have decided to withdraw from active politics and will not run as a candidate for Croatian president" in presidential elections due in 2010, Mr Sanader told a specially convened press conference in Zagreb.

"My job has been done, my political life ends now," he added, the BBC reports.

The move comes as a surprise, as Mr Sanader enjoyed a good reputation both in Croatia and abroad. Additionally, it had been widely speculated in Croatian media that he would run for president of the country and had a good chance of winning the post.

Mr Sanader said he had not taken the decision easily. He also denied being ill or dropping his post to "engage in EU institutions."

"I have always said that politics is not an end in itself," he said.

Reacting to the news, EU enlargement commissioner Olli Rehn said: "I have highly appreciated to work with Ivo Sanader on the EU accession of Croatia even if we sometimes had difficult issues to discuss in the negotiations. His leadership and commitment to European integration was instrumental to the progress we made."

"I encourage Croatia now to settle his succession rapidly so as to continue with the important reforms still ahead to get ready for EU membership."

Mr Sanader has said that his deputy Jadranka Kosor would be replacing him at the post, according to Croatian media, although it is the country's president who will appoint the new prime minister.

Most popular politician

Mr Sanader, leader of the conservative Croatian Democratic Union (HDZ), is the longest serving Croatian prime minister since the break-up of the former Yugoslavia and the only one to have had two consecutive terms in office. He was first elected in 2003 before being re-elected in November 2007.

In 2004, his country was granted official EU candidate status, before starting actual membership talks in October 2005.

At the time, Mr Sanader was voted the most popular Croatian politician.

On 1 April this year, during his second term in office, Croatia joined Nato.

Speaking to the press, Mr Sanader expressed his satisfaction that "the strategic goals [Euro-Atlantic integration] have been achieved."

But Mr Sanader suffered a blow in December when Croatia's neighbour Slovenia blocked Zagreb's EU talks over a border dispute which the two countries have not been able to resolve for nearly 20 years.

Two weeks ago, EU-led talks to agree on a form of arbitration in the dispute failed as well and the issue now seems as blocked as ever, making Croatia's hoped-for 2011 membership unlikely.