Finance Minister Jim Flaherty is resigning from the federal cabinet and will be returning to the private sector.

In a statement released Tuesday by his office, Mr. Flaherty said it is a decision that he made with his family earlier this year. Mr. Flaherty said his goal was always to get Canada back on track toward a balanced budget, a goal he said was achieved with last month's budget. (Read the statement)

Mr. Flaherty has been finance minister since Stephen Harper first became Prime Minister in 2006.

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"Now, I will focus on life beyond politics as I return to the private sector. I believe that I have served my country, province and constituents of Whitby-Oshawa to the best of my abilities and thank them for their continued trust and support for almost two decades. It has been an honour to serve Canadians with the prime minister, cabinet and caucus colleagues and all Members of Parliament in the House of Commons," he said.

"As many of you know, I faced a health issue over this past year. I have received much support and good wishes from Canadians across the country and for that, I am thankful. I am happy to report that I am on the road to a full recovery and the decision to leave politics was not related in any way to my health. This decision was made because it is the right one for me and my family at this time."

Mr. Harper issued a statement praising Mr. Flaherty's record in office.

"On behalf of cabinet, Members of Parliament and all Canadians, I thank Minister Flaherty for his long and dedicated service to his constituents and to Canada. We wish him and his family well as he begins the transition to private life," said Mr. Harper.

The government will announce a new finance minister Wednesday, sources say.

Sources say the next finance minister, who's already been chosen, "will be somebody with impressive credentials and who's very capable."

Mr. Flaherty is staying on as an MP for now. His statement is unclear on his future, but the comments about pursuing a return to the private sector suggest he plans to leave politics before the next election.

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Mr. Flaherty was a member of Ontario's legislature from 1995 to 2005, holding several cabinet positions including finance, attorney-general and deputy premier.

One of Mr. Flaherty's most controversial decisions came early on in his tenure as Finance Minister, when he broke a campaign promise and announced a new tax on income trusts. Mr. Flaherty – who later apologized for the hurt caused by the decision but stood by it as the right thing to do – recently said he still runs into citizens at airports who are angry with his decision.

Both during and after the economic crisis of late 2008 and early 2009, Mr. Flaherty played a leadership role in the G20 on financial matters. Along with India, Canada has co-chaired a committee that helps set the G20 agenda on economic policy.

Since the release of the 2014 budget, Mr. Flaherty has been particularly candid in his comments about public policy. He recently questioned the merits of a central Conservative Party campaign pledge, which is to allow income splitting for families with dependent children under the age of 18.

One of Mr. Flaherty's triplet boys, John, has a mental disability called encephalitis, which is a swelling of the brain that was caused from an insect bite as an infant.

During his time as Finance Minister, Mr. Flaherty approved several policies and tax measures aimed at helping the disabled and their families, including a Registered Disability Savings Plan launched in 2007. In his note Tuesday, Mr. Flaherty expressed pride in getting these measures adopted.

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In the statement, Mr. Flaherty thanked his wife Christine and their three sons for their unwavering support during his time in public office.

"I am lucky to have such a wonderful family," he said. "As I begin another chapter in my life, I leave feeling fulfilled with what we have accomplished as a government and a country during one of the most challenging economic periods in our country's history. We live in the greatest country in the world, and I want Canadians to know that it has been my honour and my privilege to serve them."

Toronto Mayor Rob Ford, a longtime family friend of Mr. Flaherty's, said he has "mixed emotions" about the announcement.

"It's a sad day for me, losing a friend in politics, but more that I hope he's okay. I really hope he's okay," Mr. Ford said – a reference to Mr. Flaherty's recent health problems.

"I hope I get positive news tonight that yes, he's okay, he's moving into the private sector. Because he's not just been the best finance minister, he's been a huge supporter of mine – through thick and thin," Mr. Ford said. "He's helped out the city more than any finance minister ever has."

Mr. Ford's brother, Toronto councillor Doug Ford, said the resignation came as a surprise, and described it as "a great loss to the public sector, a huge gain for the private sector."

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Doug Ford, who just a few years ago presented Mr. Flaherty with a wrestling-champion style belt that read "world's best finance minister," called him "an incredible man that dedicated a big part of his life to public service."

Mr. Ford said he's not sure where Mr. Flaherty is headed, but joked that "the truth of the matter is, we need an extra campaign manager" – a reference to his brother Mayor Rob Ford's ongoing re-election efforts.

With files from Steven Chase in Ottawa and Ann Hui in Toronto