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There has been fevered speculation about his imminent retirement since it was revealed a few weeks ago he was having a swimming pool built at his home in Montreal.
Mr Trudeau, who is a very young and fit-looking 64, swims 44 lengths every morning at his official residence in the Canadian capital, Ottawa.
Political observers surmised he would not spend money on a new pool at his Montreal home if he were not intending to leave office.
But Mr Trudeau kept the press guessing until today when he told them he had made his decision yesterday after a long walk in a blizzard.
Mr Trudeau - who has custody of his three sons by his estranged wife Margaret - told the House of Commons he was stepping down "because today is the first day of the rest of my life".
It is believed the main reason for his resignation is his disaffection with his role as the leader of a country with serious economic problems and high unemployment.
His Liberal Party, in power since 1968 with a brief spell out of power in 1979, has lost popularity as the economy has taken a downward turn.
Distinct foreign policy
During his time in office, Mr Trudeau has captivated Canada with his forceful personality and uncompromising vision of a bilingual, equitable society.
He opposed Quebec separatists fearing they would split the nation.
But, as a French-speaking Canadian, he recognised the aspirations of Francophones and pushed forward a law making English and French official languages of Canada.
He has also maintained a foreign policy distinctly different from the United States.
Mr Trudeau recognised the People's Republic of China in 1970 and fostered good relations with Cuba's communist leader Fidel Castro.
The favourite to win the upcoming leadership contest for the Liberal Party is John Turner, a former member of the Trudeau cabinet, with the second favourite being Energy Minister Jean Chretien.
Under the constitution, a general election must take place by spring next year. The opposition Conservatives, led by Brian Mulroney, are expected to win as they are currently way ahead of the Liberals in the opinion polls.
John Turner won the Liberal party leadership election later that year - but the Liberals lost to Brian Mulroney's Conservatives in 1984.
Mr Turner was succeeded by Jean Chretien in 1990 who went on to lead the party to an election victory in 1993.
The election brought an extraordinary defeat for the incumbent Progressive Conservatives, who saw their tally in the parliament collapse from 169 seats to 2.
Mr Chretien won further elections in 1997 and 2000.
Pierre Trudeau, Canada's most charismatic leader, died aged 80 in September 2000 of cancer.
Cuba's President Castro and former US President Jimmy Carter joined tens of thousands of Canadians at his state funeral on 3 October 2000.
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