Keen to protect his own ratings which are higher than those of a party discredited by claims its victory in a parliamentary election in December was achieved with the help of fraud, Putin proposed outgoing President Dmitry Medvedev as its new leader instead.
"In line with political practice here, the president stands above parties," Putin told the leadership of United Russia, describing the head of state as "a consolidating figure for all political forces in the country".
"In this regard, after the inauguration in May I deem it necessary to step down as chairman," Putin said.
The powerful prime minister, who will be sworn in as president on May 7, suggested that a party congress in the second half of May should elect Medvedev as the new chairman.
Putin, 59, has also said that Medvedev, a long-time ally who led United Russia's campaign in the December election to the Duma, the lower house of parliament, will become prime minister.
"Since Dmitry Anatolyevich led the party in the State Duma election campaign, and since I will recommend him for the post of prime minister, I believe it is right for him to head the party as well," Putin said. "It is a global practice that the government leans on the support of the parliamentary majority."
The move could be a poisoned chalice for Medvedev, however, whose popularity has dropped since he and Putin announced last September that he would step down as president and make way for Putin's return to the Kremlin.
Medvedev is less popular than Putin among party members, many of whom blame him for the relatively poor showing in December's election and view him as too liberal.
United Russia won just under 50 percent of the votes cast in the Duma election on December 4, down from more than 64 per cent in the previous poll in 2007. It rejects the fraud allegations, which triggered large protests against the party and Putin.
Putin won more than 63 per cent of votes in the presidential election on March 4, and his opinion poll ratings have long been much higher than the party's.