Lady Hermon, the sole Ulster Unionist MP, will not contest next month's election to replace David Trimble as leader of the party.
In a short statement issued at Westminster yesterday, the North Down MP cited "family commitments" as being behind her decision not to run for the leadership.
She acknowledged the support of many in the party who were keen for her to put her name forward.
"I greatly regret the disappointment my decision will cause not only to colleagues who have been so generous in their support, but also to the many people throughout Northern Ireland and beyond who have so enthusiastically encouraged me to enter the leadership race," she said.
"They will, I trust, come to understand the rightness of my decision in the present circumstances."
Lady Hermon's husband, former RUC chief constable Sir Jack Hermon, suffers from Alzheimer's disease. This is understood to be the primary factor behind her decision not to seek election.
She is one of three leading Ulster Unionists selected last Saturday by the party's executive committee to provide political leadership pending the extraordinary general meeting of the party in five weeks at which the new leader will be chosen.
Lady Hermon said it was best, given her role in that group of three, that she clarify her intentions regarding the leadership at the outset.
Her decision not to run leaves the race for David Trimble's successor wide open.
Party opinion is divided between those arguing for a more liberal stance in contrast to the DUP and those who insist that "traditional unionism" represents the best way forward.
Asked by The Irish Times whom she would like to see leading her party, Lady Hermon said: "I'm going to see who the runners really are before committing to anyone and, more importantly, which direction he plans to take the party."
However, it is understood she would not welcome the election of the defeated South Antrim candidate and anti-Agreement hardliner David Burnside, nor the choice of Lord Kilclooney, the former Strangford MP John Taylor. He has said he would serve as an interim leader pending another leadership poll, probably at the Ulster Unionist Council agm next spring.
Mr Trimble's successor will probably be found among the party's 24 Assembly members.
Of them, former minister Sir Reg Empey is interested but Michael McGimpsey, who came in behind the DUP and the SDLP's Alasdair McDonnell in the Westminster election, is not thought to be thinking of announcing his candidacy.
David McNarry, a Strangford Assembly member, may yet declare his intention to run.
Although loyal to Mr Trimble when he was leader, Lady Hermon, through her successful defence of her Westminster seat, represents an influential and visible force within the UUP arguing for change.
She does not share Mr Trimble's affinity with many on the Conservative benches, nor his sceptical views on the EU.
Arguing that her party needs to reconnect with many thousands of unionists who voted for the Belfast Agreement in the 1998 referendum, she believes her party needs a clean break with the previous leadership and a restatement of its liberal credentials.
She views talk of an interim leader or calls for "more of the same" as tantamount to jumping into the political grave.