Mrs Arroyo has survived four impeachment attempt in four years
Philippine President Gloria Arroyo has stepped down as leader of the largest party ahead of elections next May.
At a rally of the Lakas-Kampi party, she said she was handing over control to defence secretary Gilberto Teodoro.
He has already been named as the governing coalition's candidate for the presidential election in May.
One of his main challengers will be the opposition Liberal Party candidate Benigno "Noynoy" Aquino, the son of former President Corazon Aquino.
The rivals are second cousins.
"I am relinquishing [my post] today as national chairperson and handing over the reins of the party's top leadership to the brilliant, young standard bearer selected by our national executive committee, Gilbert Teodoro," Mrs Arroyo told several thousand Lakas-Kampi members.
She is due to step down next year after serving more than nine years in office.
Gilberto Teodoro, 45, is a Harvard-educated lawyer
There had been speculation that Mrs Arroyo might try to change the constitution and stay in power beyond her current six-year term to maintain immunity from possible corruption charges the opposition has threatened to launch against her.
It is now thought she may seek a seat in congress next year.
Lakas-Kampi has kept a tight grip on national and local government for the last 15 years, helping Mrs Arroyo fend off four impeachment motions in Congress since 2005.
But the party has been hit by a series of defections and Mr Teodoro's popularity rating remains low in opinion polls.
His cousin and rival, Senator Benigno Aquino, is heading the polls, capitalising from the outpouring of sympathy for his mother, who died in July.
Fellow presidential contender Benigno Aquino is Mr Teodoro's second cousin
She became a democracy icon for leading the revolt that toppled Ferdinand Marcos.
Mr Teodoro, 45, is from the wealthy, well-established Cojuanco clan which has long been split on ideological and business grounds.
He entered national politics in 1998 and served as the elected representative of Tarlac - as two uncles, a great uncle, his great-grandfather and his mother did before him.
The seat is currently occupied by his wife.
Filipinos will vote next May in presidential, congressional and local elections.