Shmuli will not be running in the March 23 election, despite offers to run with Blue and White. He will be quitting his cabinet posts as welfare and social services and social equality minister, as Labor Party institutions decided.
In a Facebook post, Shmuli wrote that he erred when he joined Prime Minister Benjamin Netanyahu's government.
"Leaders need to know to admit when they made a mistake and to take responsibility," Shmuli said. "My heart has instructed me that this is the right thing to do."
Shmuli was one of the leaders of the 2011 socioeconomic protests in Tel Aviv and the head of the National Union of Israeli Students before he was drafted by then-Labor leader Shelly Yacimovich to run for Knesset in the 2013 election.
Along with then-Labor leader Amir Peretz, he joined the current government. Current Labor leader Merav Michaeli, who opposed entering the government, passed a proposal in Labor's institutions removing the party from the government and demanding that Peretz and Shmuli leave the coalition or the party.
Peretz chose to remain in the government and leave Labor for the third time in his political career. Shmuli took his time deciding, while entertaining an offer from Blue and White leader Benny Gantz to remain a minister and receive the fourth slot on the Blue and White list in the election.
But he decided instead to take a break from politics. If he resigns from the Knesset, he would be replaced by the next candidate on the Labor-Gesher-Meretz list from the last election, former Labor MK Omer Bar-Lev, who is second on the party's list that is to be submitted on Thursday.