Lachlan Murdoch, regarded as likely heir to father Rupert Murdoch's media empire, is to quit his senior role at the family controlled News Corporation.
Rupert Murdoch (left) is close to his son Lachlan
Mr Murdoch, 33, is stepping down as a director of the media giant, in which the Murdoch family owns a 30% stake, to return to his native Australia.
Rupert Murdoch said he was "particularly saddened" by the move.
The development will fuel speculation that younger brother James Murdoch is now likely to succeed his father.
New career phase
James Murdoch, 32, has been chief executive of BSkyB, the British satellite broadcaster, since November 2003.
Lachlan Murdoch revealed on Friday that he will quit his executive role at News Corp at the end of August, although he will remain on the company's board.
He has occupied a variety of roles since 1994, most recently as deputy chief operating officer and publisher of the New York Post newspaper.
"I would like especially to thank my father for all he has taught me in business and in life," he said in a statement.
"It is now time for me to apply those lessons to the next phase of my career."
Mr Murdoch, 74, has made it clear that he would like one of his children to take over at the helm of News Corp, a global media business with interests worth about $48bn (£27bn).
He has groomed both his sons to fill senior roles within the business but before now, it had been widely assumed that Lachlan Murdoch was favourite to take the top job.
Observers may now see James Murdoch as heir apparent
He survived a close association with failed Australian telecoms firm One.Tel, which went bust in 2001 with debts of more than $300m.
Lachlan Murdoch, who was a non-executive director of the firm, oversaw News Corporation's investment in the business.
The firm's collapse resulted in combined losses for News Corp and its partner - Kerry Packer's Publishing and Broadcasting firm - of about 1 billion Australian dollars ($760m, £430m).
Number one contender?
Attention is now likely to focus on James Murdoch, who became the youngest chief executive of a FTSE 100 company when he took control of BSkyB in 2003.
Despite facing initial opposition from some investors, Mr Murdoch has since won praise for boosting the company's subscriber base although the business faces challenges in meeting its long-term targets.
Elisabeth Murdoch, formerly head of programming at BSkyB, was once seen as a possible successor to her father.
However, she quit the business in 2000 and subsequently launched her own TV production company.