He said he would formally stand down at the party’s annual general meeting next week.
There has been speculation in recent weeks that some SNP MPs were plotting to replace Mr Blackford as group leader.
In a statement released on Thursday he said: "During my time as leader, the SNP won a landslide victory in the 2019 general election, with an increased share of the vote and MPs, and support for independence has continued to grow with polling this week showing a majority in favour.
"While I am stepping down as Westminster leader, I will continue in my role as the MP for Ross, Skye and Lochaber, and I have also accepted a new role at the centre of the SNP's independence campaign, leading on business engagement.
"I would like to thank our MPs and staff for all their support over the past five years.
"Whoever replaces me as Westminster leader will have my full support as, together, we stand up for Scotland's interests and democratic right to choose our future in an independence referendum."
The SNP is gearing up to fight the next general election as a de facto referendum following the Supreme Court’s ruling that Holyrood cannot legislate for another vote on independence without Westminster’s consent.
Just last week Mr Blackford told the Scotsman he "looked forward" to putting himself forward for re-election as the party's Westminster leader, adding that he hoped to be "the MP which leads the SNP group out of Westminster for the last time".
This week fellow SNP MP Stephen Flynn knocked down reports he was seeking to challenge Mr Blackford for the top job.