Mrs Skinner did not give a timeframe in her statement issued on Friday morning, but it is understood she will tender her resignation from Parliament next week, sparking a byelection in her seat of North Shore.

Fairfax Media understands Premier Gladys Berejiklian recently met with Mrs Skinner to discuss her reshuffle options but was told by her that "it's Health or nothing".

This is despite Ms Berejiklian saying on Friday that Mrs Skinner had been invited to remain part of "the team" - understood to be a reference to her taking a more junior portfolio.

Ms Berejiklian had been widely expected to dump Mrs Skinner from cabinet in the interests of renewal as part of a reshuffle designed to "refresh" the government for the 2019 election.

It has been suggested Mrs Skinner had threatened to cause a byelection should she be dumped.

The retirement is a blow for Ms Berejiklian, who now faces at least two byelections within months - one in Mrs Skinner's seat and another in Manly following the retirement of her predecessor, Mike Baird.

"I am deeply disappointed my friend, mentor and colleague Jillian Skinner has announced her retirement," Ms Berejiklian said.

In a statement, Mrs Skinner - who is eligible for a lifetime, indexed parliamentary pension in the order of $150,000 a year, said: "I am naturally sad to be leaving the portfolio I love.

"However, a new chapter beckons and I am looking forward to the challenges of life outside politics."

Mrs Skinner has been in Parliament since 1994 and served as the opposition health spokeswoman for 14 years before being appointed minister after the 2011 election.

Mrs Skinner was the target of fierce criticism over a series of health scandals in 2016, including the chemotherapy underdosing of more than 100 cancer patients by a St Vincent's Hospital oncologist and a gas mix-up at Lidcombe Bankstown Hospital that killed one newborn and left another severely brain damaged.

The Opposition renewed its attacks after two babies were mistakenly cremated, and a body bag was mislabelled at Royal North Shore Hospital. A series of legionella outbreaks across Sydney and reports some hospital emergency departments were at breaking point intensified calls for her head to roll.

Opposition health spokesman Walt Secord acknowledged Mrs Skinner's "hard work and commitment to HIV/Hepatitis C prevention and her efforts on organ donation in NSW."

But he said said Mrs Skinner had left the NSW health and hospital system in a "sorry state".

"Unfortunately, under Jillian Skinner's tenure, health and hospitals lurched from crisis to crisis," he said.

However, Ms Berejiklian said that as Health Minister Mrs Skinner "has delivered major improvements in health services and overseen the largest expansion in health infrastructure in the state's history".

"I wish Jillian and her family well for the future and know that she will be sorely missed by so many across the entire health system," she said.

Former NSW Premier Barry O'Farrell tweeted: "Jillian Skinner was a key figure in the 2011 win & then set abt rebuilding the NSW health system. Her legacy, esp in country areas, is huge."

Mrs Skinner had many supporters among senior public health clinicians, who were impressed by her extensive knowledge of the health system and the complexities of her portfolio. Some believed she should have pushed harder for more federal government funding for health.

The devolution of the state's health system gave powers back to local health services and clinicians to largely manage their own affairs, and Mrs Skinner's advocacy of the landmark PrEP trial is on track to wipe out new HIV infections by 2020.

Illawarra Local Health district chairman Dennis Kind said Mrs Skinner was "the best health minister in living memory".

AMA NSW President Professor Brad Frankum said Mrs Skinner had approached the job with honesty and open communication.

"If a health minister can be judged on providing the spaces and facilities that doctors and other health workers need to do their jobs, Jillian Skinner leaves a good legacy," Professor Frankum said.

"It is a credit to Jillian Skinner that, in her tenure as Health Minister, she regularly met with doctors, nurses, and other health staff throughout NSW," he said.

In an interview earlier this month, former health minister Craig Knowles told Fairfax Media that Mrs Skinner's years in opposition had primed her for the role.

"I think the system appreciated the fact that she'd been around the system for a while," said Mr Knowles, who served in the former Labor government and was health minister between 1999 and 2003.

"In health, you're just one player in a pretty rich cast of senior players. You don't take on senior clinicians lightly.

"Unless they're onside, you're not going to stay in the job."