Charest, who has been the premier of the majority French-speaking province for nine years, said on Wednesday that he had decided to leave politics in the coming days after consulting with his family.
"The decision was unanimous. I will leave my post as leader of the Liberal Party of Quebec in a few days, once a new government is formed," he told reporters at a news conference at the National Assembly in Quebec City.
Charest said he was stepping down without regrets. “I'm going home now. I thank you for the privilege that you gave me to enable me to be your premier."
On Tuesday, the 54-year-old lost his seat to Pauline Marois of the Parti Quebecois (PQ), who will become the province's first woman premier.
The liberals started losing popularity after proposing a university tuition fee hike, which sparked months of massive street protests across the province.
The newly-elected prime minister has promised to revoke the controversial tuition hike.
During the electoral campaigns, Marois also promised that if elected, she would call for a referendum on the separation of Quebec from Canada.