Chief Minister Katy Gallagher will quit her job next week and the ACT parliament by Christmas to contest a vacant Labor Senate seat.
Ms Gallagher made the decision on Friday after agreeing to a personal request from federal leader Bill Shorten and Labor's Senate leader Penny Wong.
She will resign as chief minister next Wednesday and seek preselection to replace Kate Lundy, who's retiring from the Senate after 19 years.
"Obviously this was an extremely difficult decision for me because I love being the chief minister of the ACT," Ms Gallagher said.
"Anyone would take note if the federal leader of the party contacts you and asks you personally to come and join his team."
Mr Shorten said Ms Gallagher would be a star recruit.
"She will be a valuable addition to Labor's Senate team and I'm really pleased she has chosen to put her hand up," he said.
Ms Gallagher sought advice from mentors including her predecessor Jon Stanhope and Senator Lundy, who has publicly given her a "wholehearted endorsement".
She could be in the Senate within three months.
Senator Lundy is expected to leave parliament well before the 2016 federal election, once Labor decides on her replacement.
Ms Gallagher will be a hot favourite to win preselection.
While she hasn't sought any guarantees of a frontbench position, she's made it clear to Mr Shorten she doesn't want to be a "crusty old hanger on the back doing nothing".
Ms Gallagher has been chief minister since 2011, taking over when Mr Stanhope quit politics.
Before then she was deputy chief minister and treasurer.
She's also been the ACT's health minister since 2006, making her the nation's longest-serving health minister.
Ms Gallagher said she entered the assembly as a 31 year-old single mother with a three-year-old daughter.
"I leave a lot older with more grey hair and two more children and a wonderful partner who I met in the assembly as well."
Ms Gallagher presided over an increase in Labor seats - but not enough for majority government - at the 2012 territory election.
She rose to national prominence with her defence of the territory's same-sex marriage laws, later overturned by the High Court, and a compassionate response to the plight of owners of asbestos-riddled homes.
Ms Gallagher anointed her deputy Andrew Barr as the territory's next chief minister.
