Marion Marechal-Le Pen, who has been an MP since 2012, has been tipped to one day lead her aunt’s far-right anti-immigration National Front (FN) party.
But the 27-year-old politician, seen as a rising star in the FN, said she will not be standing for re-election in next month’s legislative contests.
In a letter to the Le Dauphine Libere newspaper, she said: “You know my story, you know I’ve been in this political world all my life. At 27, it is time for me to leave it for some time.”
Ms Marechal-Le Pen, one of only two FN MPs in the outgoing parliament, said she would be quitting for personal and political reasons, and it was time for “reflection”.
However, she pointed out: “I am not giving up for ever on this political battle”, though she has “absolutely no desire” to run for president.
She said she would not be running to represent her southeast Vaucluse district and is also believed to be stepping down from a regional council where she leads the main opposition group.
During the presidential election campaign, 48-year-old Marine Le Pen had tried to extend her party’s appeal to a wider base and had stepped down as party leader.
After she lost to centrist candidate Emmanuel Macron, 39, on Sunday, she said she wanted to transform the National Front, while other party officials said an alternative name was being considered.
Ms Marechal-Le Pen, whose mother Yann Le Pen is Marine Le Pen’s sister, is a popular figure among the party faithful including some who hope she will eventually take over from her aunt.
The younger politician is more conservative on social and economic issues and she took part in rallies against gay marriage laws, while her aunt avoided them.
She said her relative’s decision to soften her stance on seeking to quit the euro had come too late for voters concerned about that part of her programme.
Other differences between the two include their relationship with the party’s founder, Jean-Marie Le Pen.
Ms Le Pen is estranged from her father, while Ms Marechal-Le Pen and him have closer ties.
Speaking to Le Figaro, he called his granddaughter’s move “a desertion”.
He said: “This will create a huge disappointment… Marion represented a hope for the future for many FN voters and activists.”
Political expert Joel Gombin said of her decision: “This raises a lot of questions on how the party will evolve.
“It risks leaving a number of people orphan, and could trigger some fighting among those would like to take over from her at the head of the ultra-conservative faction of the FN.”