Raghuram Rajan, the governor of India's central bank, is to step down in early September at the end of his term.
He had been expected to stay on in the role but will return to academia.
Mr Rajan had been "open" to continuing after his initial three-year term, but has made his move after "due reflection and consultation with the government".
The former IMF economist, who was one of the few to predict the 2008 financial crisis, has been praised for his handling of the Indian economy.