The Right Reverend John Packer is retiring as Bishop of Ripon and Leeds after 13 years in the role.
He made the announcement in a letter to clergy colleagues on Tuesday.
He will retire on 31 January 2014, although his duties as bishop of the diocese will come to an end on the last day of this year.
The announcement comes ahead of the creation of the new Diocese of West Yorkshire and the Dales, replacing the Dioceses of Bradford, Wakefield and Ripon and Leeds.
The new diocese comes into being in Easter 2014 and will be led by a new diocesan Bishop of Leeds and four other Area Bishops for Ripon, Wakefield, Bradford and Huddersfield.
The creation of the new diocese means that Bishop Packer will have the distinction of being the first and only Bishop of Ripon and Leeds, a title created in 2000.
In his letter, Bishop Packer explained that retiring in January would leave the way open for a new Bishop of Leeds to prepare to come to live in Hollin House, north Leeds, the present residence of the Bishop of Ripon and Leeds.
"It has been an immense privilege to serve in this diocese for the past thirteen years, to share mission and ministry with you, and to experience so many acts of generosity - as well as of challenge.
"[Wife] Barbara and I have enjoyed living in both Sharow and Headingley and we look forward to the next stage of our lives in Whitley Bay in North Tyneside," he said.
Bishop Packer will be 67 when he retires. He entered ordained ministry in 1970 as Curate at St Helier in Southwark, then served at Abingdon in Oxford Diocese. He was a tutor at Ripon College Cuddesdon, Vicar of Wath-upon-Dearne and then Team Rector at Sheffield Manor.
He became Archdeacon of West Cumberland and was later appointed as Bishop of Warrington. Six years after becoming Bishop of Ripon and Leeds in 2000, he was called to the House of Lords where he has had an impact as Bishops' Parliamentary Spokesperson for immigration and asylum, urban affairs and welfare reform.
The Bishop of Knaresborough, the Right Reverend James Bell, will assume Episcopal responsibility for the Diocese of Ripon and Leeds between 1 January and the start of the new diocese at Easter.
Bishop Bell will then become Bishop for the Ripon Episcopal Area under the new arrangements.
He paid tribute to Bishop Packer, saying: "John is probably the most collegial bishop in the Church of England and one of the most humane.
"That generous collegiality and warm humanity, together with his absolute integrity, abounding pastoral care and generous hospitality have shaped who and how we are as a diocese.
"His passion for justice combined with transparent sincerity have won appreciation for his ministry regionally and nationally."
Bishop Packer added: "It has been a particular delight to work with James for the past nine years and I am pleased that he will have the responsibility for guiding Ripon and Leeds into the new diocese, where he will continue to work as Bishop of Ripon."
The appointment of the Bishop of Leeds is expected to be announced in February.