Member for Goulburn, Pru Goward, will quit politics at the state election next year after nearly 12 years representing Boorowa.
Ms Goward announced her retirement in December, after more than a decade in state politics, including seven years in the Coalition ministry.
“This was a very, very difficult decision to make and one I make in the best interests of my family,” Ms Goward said.
Ms Goward said her husband had been "very unwell" and her "family circumstances have changed quite quickly in the last few weeks".
Her retirement, which comes weeks after she was preselected to recontest the seat, further weakens the government's position going into the state election in March.
The Coalition would be plunged into minority government if it loses just six seats, and it is already defending six seats on margins of under 5 per cent.
The Liberal Party holds Goulburn by a margin of 6.6 per cent, but the departure of Ms Goward - a high profile local member - leaves the party increasingly vulnerable to Labor or an independent challenger.
Former Senator Ursula Stephens will again contest the seat for Labor.
NSW Premier Gladys Berejiklian, who stood beside Ms Goward as she announced her decision, thanked her for her service and said her "courage and her resilience are her legacy for this state".
“Pru has been a trailblazer for women in this country, an outstanding minister and a strong advocate for the people of the Goulburn electorate," Ms Berejiklian said.
Ms Goward said her portfolios had "involved complex social issues" and "often filled with great sadness" as she defended her record.
"Reform is never easy but worth the fight. I never walk away from tough decisions," she said.
Ms Goward won the seat of Goulburn at the 2007 election, and was promoted to then-premier Barry O'Farrell's frontbench in 2011 as Family and Community Services Minister.
Since then she has held various ministries, including planning, mental health, social housing, and prevention of domestic violence and sexual assault.