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German Chancellor Angela Merkel thanked Annegret Kramp-Karrenbauer after she stepped down as the Christian Democratic Union (CDU) leader on Monday.
Merkel said she accepted the decision with the "utmost respect". She made the comments at the start of a press conference with Hungarian Prime Minister Viktor Orban in Berlin.
Kramp-Karrenbauer was widely seen as the favoured successor of Merkel.
She was recently criticised for failing to exercise discipline in the party after local CDU politicians defied her wishes in the eastern state of Thuringia.
They united with the far-right Alternative for Germany (AfD) to install liberal candidate Thomas Kemmerich as Minister President.
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