She will leave the office after a 42-year career in politics, in which she rose to prominence during the Covid-19 pandemic, which saw her implement China’s trademark zero-Covid policy in the financial centre.
She is also known for facing down some of the longest running street protests in Hong Kong’s history, which involved clashes between police and protesters, led by pro-democracy activists.
As many as 10,000 people were arrested and 15 died during street clashes where protesters railed against a government bill that would have threatened Hong Kong’s separate legal status in relation to mainland China, dubbed “one country, two systems”.
Ending months of speculation, Ms Lam confirmed she will not seek a second term when a committee made up of the city's political elite chooses a new leader next month.
“I will complete my five-year term as chief executive on June 30, and officially conclude my 42-year career in government,” Ms Lam told reporters.
Ms Lam said China's leaders “understood and respected” her choice not to seek another term and that she wanted to spend more time with her family.
A career bureaucrat, Ms Lam became Hong Kong's first woman leader in 2017.
The 64-year-old had dodged questions for months over whether she would run again and during Monday's announcement she revealed that had informed Beijing of her plans to quit more than a year ago.
Hong Kongers and businesses based in the finance hub currently have little clarity on who will be the next leader.
The chief executive position is not elected in a popular vote, one of the core demands of years of democracy protests which have since been crushed.
Instead, the position is selected by a 1,500-strong pro-Beijing committee, the equivalent of 0.02 per cent of the city's 7.4 million population.
The city's next chief executive will be chosen on May 8 but so far no one with a realistic prospect has publicly thrown their hat into the ring.
Hong Kong's number two official, John Lee, who has a background in the security services, has been tipped by local press as the most likely contender.
Another potential front-runner is finance chief Paul Chan.
Ms Lam's successor will take office on July 1, the 25th anniversary of Hong Kong's handover by Britain to China.
From protests to zero-Covid
Supporters see her as a staunch Beijing loyalist who steered the city through huge democracy protests and a debilitating pandemic.
Critics, including many western powers, view her as someone who oversaw the collapse of Hong Kong's political freedoms and its reputation as a stable regional business hub.
After huge and sometimes violent protests swept Hong Kong in 2019, Beijing responded with a crackdown that has remoulded the once outspoken city into a mirror of the authoritarian mainland.
Ms Lam became the first Hong Kong leader to be placed under sanctions by the US because of her support for the crackdown, in which most of the city's prominent democracy supporters have been arrested, jailed or fled overseas.
Her administration also followed China's zero-Covid model, implementing some of the world's toughest anti-coronavirus measures and exasperating international businesses.
The largely closed borders and strict quarantine rules kept infections at bay for about 18 months at the cost of Hong Kong being cut off internationally.
But the zero-Covid strategy collapsed when the highly transmissible Omicron variant broke through earlier this year, leaving Hong Kong with one of the developed world's highest fatality rates.
Hong Kongers have been leaving the city over the last two years at a rate not seen since the period before the handover.