Sir John Stevens has been a policeman for 43 years

Sir John, 61, took on the job in 2000, but has decided not to extend his contract when it ends in five months.

He will continue to head inquiries into alleged collusion in Northern Ireland killings and Princess Diana's death.

Metropolitan Police Authority (MPA) chairman Len Duvall said he had led the force through "the most challenging times" in its 175-year history.

Sir John announced his retirement at a meeting of the MPA on Thursday and will step down on 31 January 2005.

It will end a 43-year police career, which started with a posting as a beat officer in Tottenham, north London.

Sir John said: "At 57 I remember people saying I was too old to do it.

The commissioner has had to deal with the highest level of terrorist threat our capital has ever experienced Len Duvall, MPA chairman

"Now, coming up to 62, people are saying: 'Well, maybe he could do a bit more'."

He took over as head of the London force a year after it had been labelled "institutionally racist" by the McPherson Inquiry into the Stephen Lawrence murder.

Morale was low, but Sir John said the force had since got its confidence back and this year the Met reached 30,000 officers, the highest number in its history.

He said he loved doing the job, but regretted not getting justice for 10-year-old Damilola Taylor, who was killed in Peckham, south-east London in November 2000.

Other challenges have included overseeing the anti-terrorism policing efforts which followed the 11 September attacks in the United States.

'Straight-talking approach'

Mr Duvall said: "The commissioner has had to deal with the highest level of terrorist threat our capital has ever experienced and it is an accolade to the diligence and resilience of his officers and staff that London has held fast against terrorist attack."

Sir John also heads the investigations into the death of Princess Diana and allegations that Northern Ireland security forces and loyalist murder gangs colluded in several killings.

Prime Minister Tony Blair said he valued Sir John's integrity and "straight-talking approach".

"Sir John has brought outstanding leadership during one of the most challenging periods in modern policing.

"His contribution to fighting crime on London's streets, dealing with the terror threat and modernising the police force has been immense.