Jim Watson served as mayor of Ottawa from 1997 to 2000. (www.jimwatsonmpp.ca)

Municipal Affairs and Housing Minister Jim Watson has resigned from the Ontario cabinet to run again for mayor of Ottawa.

"I think that we need new leadership at the City of Ottawa to restore ... some of the credibility that's been lost over the last couple of years," Watson, 48, told CBC News Tuesday.

Watson stepped down from his cabinet position Tuesday morning and said he will also step down as MPP for Ottawa West-Nepean before the Ontario legislature reconvenes on Feb. 16.

At the same time, he formally announced his intention to seek the Ottawa mayor's seat in the municipal election on Oct. 25. He will officially register as a candidate after resigning from his position as MPP.

Watson was mayor of Ottawa from 1997 to 2000.

Watson said he decided over the Christmas break to run for the job again after being approached by people who were "frustrated about the direction and performance at City Hall."

He added that the city has done a poor job of communicating to Ottawa residents about the green bin program and last year's bus strike.

"The past few years have not been the city's finest, and I believe the residents and taxpayers of this city deserve better," Watson said in a statement. "Leadership and ideas matter. We cannot afford to have another four years like the past four, and I believe my talents can best be used leading the City of Ottawa."

So far, Watson's competitors for the mayor's job are Bay Ward Coun. Alex Cullen and Robert G. Gauthier, former publisher of the independent newspaper National Capital News. They announced their candidacies last week.

Mayor Larry O'Brien has said he will not reveal until June whether he is running for re-election.

Transit tunnel may have to go: Watson

Watson said he expects to spend his first months of the mayoral campaign listening to residents before issuing a series of platform statements.

When it comes to Ottawa's $2.1-billion light-rail transit plan, Watson said the city may have to rethink the proposal to fit a tighter budget. He said it doesn't necessarily have to include a downtown tunnel if that proves too costly.

Watson is the second member of the Ontario cabinet to resign to take a run at municipal politics.

Premier Dalton McGuinty already has to replace former deputy premier George Smitherman, who resigned last week to run for mayor of Toronto.

On Tuesday, McGuinty thanked Watson for his work in provincial government.

"By departing provincial politics to seek election at the municipal level, Jim is demonstrating his belief in public service and commitment to improving the lives of families in my hometown of Ottawa," McGuinty said in a statement.

Environment Minister John Gerretsen, who has previously served as Ontario's minister of municipal affairs and housing, will take over the cabinet portfolio again on an interim basis.

Provincial Conservative Leader Tim Hudak said Watson's resignation is "further evidence that even Dalton McGuinty's ministers have grown tired of defending his tax grabs, reckless spending and runaway deficits."