Long-serving federal Labor MP Mike Kelly has quit politics, triggering a knife-edge by-election in his marginal southern NSW seat.

The 60-year-old announced his decision at an emotional media conference on Thursday, ending months of speculation.

“I certainly couldn’t cope mentally with not being able to go full pace at this job,” he said.

“My whole life of 36 years of public service has been body and soul into whatever I’ve done, and I’m sort of paying a bit of a heavy price for that at the moment.”

Serious kidney issues and deteriorating osteoarthritis stemming from his army service have hampered the former colonel’s ability to travel through his country seat of Eden-Monaro.

He has had at least 10 medical procedures in the past six months to address damage to his renal system, caused by severe dehydration during military tours in Iraq, Somalia and East Timor.

Mr Kelly, who was elected to Eden-Monaro in 2007, broke down as he thanked his family for their support.

“I really do regret and it has broken my heart to do this. It’s gut-wrenching,” he said.

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Opposition Leader Anthony Albanese and Prime Minister Scott Morrison have played down their parties’ hopes of winning the seat.

Mr Albanese said the Coalition would be favourite because of Mr Kelly’s high personal standing in Eden-Monaro, which he estimates is worth 3-4 per cent of the vote.

Mr Morrison points to history, with the sitting government last winning a byelection from the opposition in 1920.

Labor holds the seat with a margin of less than 1 per cent.

Liberal likelies: John Barilaro, Andrew Constance and Jim Molan. Photo: AAP

The byelection is expected to be a three-cornered contest with high-profile Coalition members – including NSW Transport Minister and Bega MP Andrew Constance, NSW Deputy Premier John Barilaro and Liberal senator Jim Molan – jostling to run.

Labor is also keen to retain the seat. Bega mayor Kristy McBain is considered a likely ALP candidate.

Mr Barilaro said a three-cornered showdown would not be in the Coalition’s best interests.

The NSW Nationals leader has vowed not to run against Mr Constance as he weighs up the decision to run over the weekend.

“I can’t rule it out, don’t rule it in,” he told Sky News.

Mr Barilaro’s state electorate covers the Queanbeyan area, where the majority of the Eden-Monaro population lives.

“If I do this, I do this knowing I could be out of politics,” he said.

Eden-Monaro also takes in the bushfire-hit town of Cobargo, whose residents gave Mr Morrison an extremely hostile reception earlier in 2020.

Scott Morrison attempts to shake the hand of a firefighter in Cobargo in January.

-with AAP