Democrats are scrambling to find a replacement candidate.
Republicans now have a better shot at winning enough Senate seats in November to regain control of the Senate.
"I really care about making a difference," said Sen. Bayh.
Making a difference was something Evan Bayh says he thought he couldn't do as a senator with the excessive partisanship these days in Congress.
During the announcement that stunned so many, Bayh gave two key examples of how he says Congress has lost its way: the failure of a bill to establish a deficit reduction panel after seven co-sponsors of the bill voted no. And he blamed Majority Leader Harry Reid for shooting down a bipartisan job creation bill that had Republican support.
"I loved helping my citizens make the most of their lives, but I do not love Congress," Bayh said during a news conference in Indianapolis Monday.
Bayh's announcement, coming on the heels of Patrick Kennedy and Senators Chris Dodd and Byron Dorgan's unexpected retirements, only increases the odds of Republicans winning back control of the Senate, something considered nearly impossible one month ago.
As for who will replace Bayh on the ticket, it seems to be up for grabs.
The deadline for submitting 4,500 signatures to qualify as a candidate is February 16 at noon.
Marie Eisenstein, associate professor of political science at Indiana University Northwest, says no candidate was prepared for Bayh's announcement.
"This will come down to being a party decision for who's going to be selected to represent the Democratic party in November," said Eisenstein.
If the Democratic party leaders are listening, Hammond Mayor Thomas McDermott is already campaigning for the nomination.
"I'd be honored to run and I would run hard and I would really love to be in that race but it's up to a bunch of other people right now," said McDermott.
Sen. Bayh says he hopes to help businesses create jobs or run a charity.
President Obama issued this statement:
"For more than two decades, Evan Bayh has devoted his career and his life to serving his fellow Hoosiers. During that time, he has fought tirelessly for Indiana's working families, reaching across the aisle on issues ranging from job creation and economic growth to fiscal responsibility and national security. I look forward to continuing to work with him on these critical challenges throughout the rest of the year."