Just halfway through his government's term, Mr Baird announced he's quitting politics, citing his family’s ill health as a major factor.

“There is a strong personal cost that comes in public life,” he said, his eyes tearing up as he looked at his wife and three children during the media conference.

“I've probably felt that more than any other time in the past few months.

“My father and my mother and my sister are going through a very serious health challenge and, to be honest, at times I have been in pain not being able to spend the time that I should.”

Mr Grant, who stepped down as NSW Nationals leader following the party’s loss in the Orange by-election, was not surprised by Mr Baird’s departure.

But he told reporters in Sydney he was disappointed to see his “great mate” leave politics.

“I was enormously proud to serve as his deputy premier,” Mr Grant said.

“We achieved incredible things for this state, and it's a sad day for NSW more than anything.

“He's made the decision in the best interest of his family and that always has to come first and I'll always support him.”

In a statement, Deputy Premier John Barilaro also paid tribute to Mr Baird’s leadership.

“I have always admired him as a politician who brought a fresh approach and strong direction to the NSW Government and Cabinet,” Mr Barilaro said.

“In the short time I have been in the role of Deputy Premier and Leader of the NSW Nationals I have enjoyed working alongside him and congratulate him on delivering for the state of NSW.

“Mike Baird leaves the role of NSW Premier with an impeccable record and legacies to be proud of, including a supercharged economy and unparalleled infrastructure across metropolitan Sydney and regional NSW.”

The Liberal Party will elect a new leader and premier at a party room meeting next week, with Treasurer Gladys Berejiklian tipped to be his successor.

His resignation will also a trigger a by-election for the seat of Manly in Sydney's north.

Mr Baird said the decision to step down from being “premier of the best state in the best country in the world” had not been easy, but the timing was right.​

“There's a number of policy decisions we've made that I strongly believe make a huge difference to people's lives and, you know, I've given my best. I've given my all. I mean, there is nothing left. I have worked as hard as I possibly can for the people of this state,” he said.

“The economy - remember what New South Wales was like? It was a basket case. It now has the strongest economic growth, it has got the strongest jobs growth, it has got the strongest and highest housing approvals in the nation, and the lowest unemployment rate.

“Every organisation needs to refresh...I think refreshing now gives a new premier two years, an opportunity for them to put their mark on the government at the same time, to set an agenda that is theirs.”