Rumours of his retirement first surfaced Wednesday night, but the confirmation still appeared to leave many of his supporters stunned.
During his 17-minute address, he touched briefly on his government's success in eliminating its deficit, and fighting for more funding for health care over the past few years.
But Bouchard spoke sadly about failing to achieve his dream of an independent Quebec.
Lucien Bouchard
"I accept my share of the blame for failing to rekindle the flame and to impress upon our fellow citizens the gravity of the situation," he said.
"I regret one thing – not having done better and more," he added. "I recognize that my efforts to revive the debate were in vain."
It's now time for someone else to lead the sovereigntist cause, according to Bouchard, who will leave his post once the Parti Québécois picks a new leader.
- BACKGROUND: The man and his politics
The premier said he hoped his departure will lead to "a fundamental debate" over sovereignty so that the party can be renewed and the dream realized.
"I have confidence in the future of Quebecers because I know they are capable of great things, individually and collectively," he said.
Bouchard, 62, thanked his supporters and family, especially his wife Audrey, pointing out that she has given more than he can ever give back.
He said it's important he spend more time with her and their two sons, aged 11 and nine.
"I have a young family that is all the more precious because it came to me late," Bouchard said, his voice quavering. "Alexander and Simon need me and I need them. I need to give my best energy and quality time for the future."
- JOIN THE DISCUSSION: What will happen to the sovereignty movement?
Bouchard had no kind words for his enemies, slamming those in the party who had criticized him during a recent controversy with hardliner Yves Michaud – a popular PQ member who made some comments that offended the Jewish community.
- FROM DEC. 13, 2000: Quebec politician blasts Jews, immigrants for not understanding sovereignty
Bouchard had ordered him to retract; Michaud had refused.
"I have no taste for continuing any discussions whatsoever on the Holocaust and the vote of ethnic and cultural communities," Bouchard said in his speech.
"Statements to this effect hurt Quebec's reputation abroad. Even right here they certainly didn't improve the capacity of sovereigntists to convince the people targeted."
Bouchard has had a strained relationship with hardliners in the PQ, who have frequently questioned his commitment to the sovereigntist cause.
The premier and hardliners also clash often over the language debate. Bouchard disagrees that the law protecting French needs to be tougher.
- BACKGROUND: C'est la vie: Quebec's language law
At a convention in 1996, party members gave him a low approval rating but changed their minds after he threatened to quit.
Bouchard became premier in January 1996 after former Parti Québécois leader Jacques Parizeau resigned. Parizeau stepped down after he narrowly lost an October 1995 referendum on separation. Bouchard's immense personal popularity is credited with reviving the flagging separatist movement in Quebec.
- RELATED STORY: Mixed reaction to Bouchard's decision
A former ambassador to France and a senior cabinet minister in the government of Brian Mulroney, Bouchard founded the separatist federal party the Bloc Québécois in May 1990.
Bouchard survived a flesh-eating disease but lost his left leg in December 1994.
Three candidates are thought to be in line to take over the Parti Québécois, including Bernard Landry, Education Minister François Legault and Minister of Health Pauline Marois.
Landry is seen as the front-runner, but none has the wide appeal of Bouchard.
