Monday's news came as a surprise to CDU party officials, who had expected Merkel to seek re-election as chairwoman at a party congress in Hamburg in early December.
Merkel, 64, has been CDU chairwoman since 2000 and giving up the role would start a race within the party to succeed her as chancellor.
Her current term as chancellor runs into 2021 - and Merkel said she is "prepared" to stay in the chancellor post through her current term.
Five years after these photos were taken, Mrs Merkel would be elected leader of her country and eventually become known as the most powerful woman in the world.
Merkel's conservative Christian Democratic Union was defending its 19-year hold on Hesse, previously a stronghold of the centre-left Social Democrats, the chancellor's coalition partners in Berlin.
"Secondly, this fourth term is my last as German chancellor".
This position has allowed the so-called grand coalition which presently rules Germany, an alliance between the main centre-right CDU and main centre-left SPD, from parties which should, in theory, be opposed on government but are united in keeping other voices out of power.
2 girls planned to kill classmates, drink blood
Notices have been sent to the parents/guardians of students at Bartow Middle School informing them of the situation. Afterwards, the girls would leave the body parts at the school's entrance before killing themselves, they said.
The debacle followed a battering in a state election in Bavaria two weeks ago for the CSU and the Social Democrats.
Seen by many as Merkel's anointed successor, Kramp-Karrenbauer cautioned that "if the government falls apart now, it will result in new elections", a barely concealed warning to would-be coalition breakers in both the CDU and SPD.
Preliminary final results showed both of the formerly dominant parties being hit with losses of around 11 percentage points in Hesse, western Germany, compared with the last election in 2013, although the CDU still claimed first place with 27 percent of the vote.
Merkel has loomed large on the European stage since 2005, helping guide the EU through the euro zone crisis and opening Germany's doors to migrants fleeing war in the Middle East in 2015 - a move that still divides the bloc and Germany. But there is precedent for splitting the two jobs.
Nahles declined to comment Monday on the reports that Merkel might step down as CDU leader.
Following the close election results, the SPD's leader, Andrea Nahles, has announced a mid-term review of the current coalition government next year, taking the declining voting numbers as a sign that the German electorate is growing exhausted of the coalition's constant in-fighting and lack of progress on bringing legislative change to Germany.
She has since defended her decision, saying she would make the decision "the same way again".