The National Party will choose a new candidate for the Kelston seat to replace outgoing list MP Claudette Hauiti in the next few weeks.
Prime Minister John Key said on Tuesday that Ms Hauiti was told by the party last week that she would receive a low list ranking if she stayed on.
Last week, she apologised for misusing a card issued to MPs to pay for expenses after a trip to Australia and handed it back to Parliamentary Service.
Mr Key said the party - particularly at an electorate level - was very disappointed at her actions. He said Claudette Hauiti made a mistake and intends to pay the money back.
National Party president Peter Goodfellow said he had been officially notified by Ms Hauiti that she would not be contesting the election on 20 September.
Ms Hauiti was selected as National's candidate for the new Auckland seat of Kelston for National, but on Tuesday announced she will stand down.
Nominations for the seat will reopen on Wednesday and close on 30 July. Mr Goodfellow said a board selection panel would select her replacement.
Claudette Hauiti came into Parliament in 2013 to replace former MP Aaron Gilmore.