OUTGOING Premier Anna Bligh has announced her resignation from politics after leading Labor to a record-breaking election defeat.

Her shock retirement opens the way for a by-election in South Brisbane, previously a safe ALP seat that was reduced to a tenuous 3 per cent margin last night.

"Today I announce I will be standing aside as leader of the parliamentary Labor party and further I will be resigning as the member for South Brisbane,'' she told reporters at Speakers Square at Parliament House.

Her decision allows Labor to parachute a dumped MP into her seat, with the potential for ALP talent and former deputy premier Andrew Fraser or former education minister Cameron Dick to be thrown an election lifeline.

But the move could prove risky with a by-election win far from certain for Labor.

Ms Bligh said should would resign on Friday as the member for South Brisbane.

She said Queenslanders had voted to "close the book'' on her era in Queensland politics and Labor could not rebuild with her in the team.

“I simply don't believe that Labor can develop an effective opposition...if it has me as part of its public face."

She apologised to electors in South Brisbane for the "inconvenience" of putting them through another election.

Ms Bligh said she would hand in her resignation as premier to Governor Penelope Wensley at 12.30pm Sunday.

She said it had been her intention to remain but the size of the loss made her reconsider.

"The size of the loss and the loudness and clarity of the message sent by the people of Queensland is unmistakable,'' she told reporters.

"And in fairness to Queenslanders I don't believe I should ignore it.''

She said the result was "absolutely shattering'' for the ALP.

"It is much more than a loss, it is without doubt a devastating defeat.''

She said Labor must not succumb the the heartbreak and must look ahead to the rebuilding task.

"The task for us is to do everything in our power to recover, to rebuild and to renew and to be everything this party has been for more than a century,'' she said.

"This is going to be clearly an enormous task.''

Ms Bligh refused to speculate if her deposed deputy Andrew Fraser, or dumped education minister Cameron Dick, would be put up by Labor in South Brisbane.

She said she had no idea what she would do next, but today closed the book on her time in Queensland politics.

Ms Bligh said she had given her all in the job of premier, and hoped Queenslanders could see that.

"Every single minute I gave Queensland the best that I could give,'' she said.

She accepted full responsibility for Labor's loss, and apologised if her decision inconvenienced voters in the electorate she's served since 1995.

Originally published as Shattered Anna Bligh quits politics