The Queensland senator made the shock announcement late on Tuesday, saying her condition - which was not publicly known - had deteriorated.
"I've been managing kidney disease for some time but recently it's taken a downturn," Senator Waters posted on X.
"My prognosis is good, but doctors are clear that recovery needs a slower pace than leading a party allows."
Senator Waters assumed the Greens' leadership after former Melbourne MP Adam Bandt sensationally lost his seat at the May 2025 federal election.
In a statement, the Greens lauded her efforts to secure an overhaul of Australia's environmental laws to reform native logging, land clearing and push back on fast-tracking coal and gas projects.
The party also helped Labor ram revamped gun laws through the Senate in the wake of the Bondi massacre, which include a planned national gun buyback.
More recently, Senator Waters' party has pushed back hard on reforms aimed at drastically cutting NDIS spending, delaying the bill's passage for months in order to extend an inquiry into the sweeping changes.
The party will begin the process of selecting a new leader in the coming days.
The outgoing leader has been a senator since 2011, save for a 14-month period where she was forced to resign because she held Canadian citizenship.
She will go on medical leave but will not quit the Senate.
"I'm really sad that illness means my time as leader has been cut short, but our movement needs a leader in good health to lead us to success," Senator Waters said.
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