Tim Hudak will step down as Progressive Conservative Leader when the Ontario Legislature returns July 2, citing divisions in his caucus over the timing of a leadership convention and whether the party should become more moderate.

In a resignation letter to his MPPs, he obliquely criticized those who would move the party closer to the political centre as being less earnest about dealing with the province's ballooning debt and deficit.

Mr. Hudak led the Tories to a surprising electoral defeat last week, losing nine seats on the back of a robustly right-wing plan to cut 100,000 public-sector jobs over four years and slash corporate taxes to the lowest level in North America.

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In his letter, he said he had hoped to stay on until a fall leadership race, but that at a meeting earlier this week, MPPs did not agree on when to hold the vote. Some members, he wrote, wanted a "prolonged transition period" before a new leader takes over.

"As such, I believe it is in the best interest of the Party and of my own family for me to step down as Party Leader and Leader of the Official Opposition effective July 2, 2014," he wrote.

Caucus will choose an interim leader to steer the party until the convention.

Mr. Hudak said in his letter that MPPs are split over whether to continue on his right-wing path or move the party closer to the political centre.

"Some held the view that the urgent need to address Ontario's fiscal situation should be moderated while others remain firmly committed in the belief that the course we laid out in the campaign will ultimately be proven right," he wrote.

Mr. Hudak lost what had been thought to be a close election to Kathleen Wynne's Liberals by a substantial margin after the Grits targeted his plan to cut the size of the public sector.