One of Victoria's longest serving treasurers called time on Monday after a decade in the job and 18 years in politics.
"It has been a great honour and a privilege to have the opportunity to serve," Mr Pallas told reporters on Monday.
Mr Pallas was assistant secretary of the Australian Council of Trade Unions and chief of staff to Steve Bracks before entering parliament in 2006.
His resignation comes just days after his mid-year budget update revealed a projected deficit of $3.6 billion in the 2024-25 financial year.
Mr Pallas handed down his 10th budget in May, which revealed the government was delaying more than 100 already announced projects, including a plan to build a new Royal Melbourne Hospital and Royal Women's Hospital.
On Friday, he said net debt would reach $155.2 billion by July.
It follows increased spending on the Melbourne Metro Tunnel and a $1.5 billion injection into the state's hospitals.
Mr Pallas on Friday defended the deficit, saying the state will record a surplus the year after.
"Our economic future is secure," he said.
The treasurer announced his resignation to the media on Monday morning alongside Premier Jacinta Allan.
His retirement will likely trigger a by-election in the seat of Werribee.
Mr Pallas joins a long list of Labor MPs who have left politics in recent years, including former deputy premier James Merlino, former health minister Martin Foley and former police minister Lisa Neville.
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