"There are better ways to serve my fellow citizens," Bayh said at a news conference this afternoon. "I love working for the people of Indiana. I love helping our citizens make the most of their lives, but I do not love Congress."
Bayh, who served two terms as governor of Indiana, said he was concerned about the excessive partisanship in national politics.
There is "too much narrow ideology and not enough practical problem solving," Bayh said today, surrounded by his wife and two sons. "People's business is not getting done."
Bayh gave glaring examples of where things have fallen apart -- the failure of the deficit reduction commission after seven co-sponsors of the bill voted No, and the failure of the bipartisan job creation bill that had Republican support but was torpedoed by Senate Majority Leader Harry Reid, D-Nev.
Bayh, 54, said Congress is in "need of significant reform," but he praised some of his colleagues, including his fellow senator from Indiana, Republican Dick Lugar.
"If Washington, D.C. could be more like Indiana, Washington would be a better place," Bayh said.
He added that concern about winning the Senate seat again was not a reason behind his decision.
"My decision was not motivated by political concern," Bayh said. "Even in the current challenging environment, I am confident in my prospects for re-election."
President Obama released a statement this afternoon saying he looks forward to working with Bayh for the rest of the year and thanking him for "serving his fellow Hoosiers."
"He has fought tirelessly for Indiana's working families, reaching across the aisle on issues ranging from job creation and economic growth to fiscal responsibility and national security," said the president. "Michelle and I thank Senator Bayh for his leadership and service and wish him and his family all the best in their future endeavors."
In an ABC News/Washington Post poll released last week, 71 percent of Americans said they disapproved of Congress, the highest rate since 1994 when the GOP swept to power in a midterm rout of the Democrats.
The two-term senator's decision came as a surprise to many Washington insiders and it blows a sizeable hole in the Democrats' 2010 lineup. It is only the latest in a series of unexpected and premature retirements -- Sen. Chris Dodd, D-Conn., and Sen. Byron Dorgan, D-N.D., both have said they will not seek reelection -- and Democrats face steep challenges ahead in trying to hold on to those seats, among a range of others.
Republicans have long eyed Indiana as a prime pick-up opportunity and Bayh's retirement is likely to intensify chatter about the GOP's chances to take over the Senate this year. Republicans are favored to win in North Dakota. They may also be able to capture Vice President Joe Biden's old Senate seat in Delaware and President Obama's former seat in Illinois.