Tokyo's governor Shintaro Ishihara is resigning to form a new national political party, ahead of expected general elections in Japan.
"As of today, I will resign as the Tokyo governor," he told reporters.
The 80-year-old, serving his fourth term as governor, is known for making provocative comments.
Earlier this year, he sparked off a row when he said he would use public money to buy a group of islands at the centre of a dispute between China and Japan.
The novelist-turned-politician, who began his current term as governor only last April, said he wants to return to national politics.
He said he would be founding a party with other right-wing politicians to challenge the two dominant parties in polls that must be called by the end of next year.
He blamed Japan's current economic and political problems on the government and compared the administration to the rule of the shogun, referring to the hereditary commanders-in-chief in feudal Japan.
"We must change the inflexible rule of the central government bureaucrats," Mr Ishihara said.
Earlier reports had said Mr Ishihara was aiming to form a group large enough to challenge the two established parties - the ruling Democratic Party of Japan (DPJ) and the opposition Liberal Democratic Party (LDP) - at the next elections.
But the reports in the Japanese media had not suggested that Mr Ishihara would quit his role as governor - one he has come to own.
He said he saw ''several contradictions, big contradictions'' in national politics.
"One contradiction, bigger than anything, is the Japanese constitution, which was imposed by the [post-WWII US] occupying army, and is rendered in ugly Japanese," he said.
He is demanding the repeal of pacifist clauses in Japan's constitution, which restricts the activities of the country's armed forces.
The BBC's Charles Scanlon says Shintaro Ishihara has long been Japan's most outspoken and confrontational politician.
He has consistently antagonised China, and provoked the crisis in relations this year with his plan to buy and develop a group of disputed islands, our correspondent says.
Foreign policy analyst Tomohiko Taniguchi told the BBC that one of Mr Ishihara's aims might be "to push his party and himself to a position pivotal enough to change the course of coalition-building in Japan".
"Japan's political landscape will therefore look more confrontational between the left - which is also friendlier to Beijing - and the right, [which] takes [the] national interest [and] national security more highly than the left," Prof Taniguchi said.
Ahead of the elections the DPJ is seeing its support plummeting. Earlier this week, approval ratings for the government slipped below 20% for the first time, Japanese media reported.
Meanwhile, the opposition LDP chose former PM Shinzo Abe as its new leader last month, potentially positioning him to become the next prime minister.
Ties between Tokyo and Beijing remain severely strained by a row over a group of islands both claim - known as Senkaku in Japan and Diaoyu in China.
Tension flared again when Mr Ishihara said he wanted to buy the islands in April. In September, the Japanese government confirmed its purchase of the disputed islands from private owners.
Japanese ministers said the move prevented ties from worsening with China - which was certain to happen if Mr Ishihara had succeeded in buying the islands.
On Thursday, four Chinese surveillance ships were seen near the islands, the Japanese coastguard said, prompting Japan to lodge a diplomatic protest with China. China confirmed the vessels were in the area but said they were on routine patrol.