His decision comes amid allegations that he passed market-sensitive information to financier Jeffrey Epstein.
The Lord Speaker, Lord Forsyth of Drumlean, announced that Lord Mandelson would formally step down from the House on Wednesday, 4 February.
The Clerk of the Parliaments received notification of Lord Mandelson's intention to retire.
Sir Keir Starmer had previously threatened legislation to strip Lord Mandelson of his title, and police are currently assessing information regarding alleged misconduct in public office.
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