Former Labour deputy leader Roy Hattersley has called on Tony Blair to quit Downing Street in September.
He said the longer the Prime Minister stayed on beyond this year's Labour conference the more damaging it would be for the party.
Lord Hattersley also described Chancellor Gordon Brown as the "ideal" candidate to take over as left-wing MP John McDonnell embarked on his rival leadership bid.
"The Prime Minister ought not to announce he's going at party conference - he ought to go at party conference," said the Labour peer.
He said Mr Blair should point to Labour's achievements over the last nine years.
"Then he should say but the time has come to pass the torch on to somebody else and thank the party for what they've done," he added.
"If we did that I think he'd go out on a high note in the party and I think that would ripple out through the country.
"The longer he stays on, the more damaging it is for him as well as the party in my view."
If Mr Blair stayed on until next year, it would be "impossible to put new life" into the Labour Party, Lord Hattersley said. "Everything is held in the balance, we're all holding our breath, we're all waiting for the clock to strike and until that happens it's impossible to do a re-invigoration job that is so necessary."
But he added that he did not want him to be "pushed" out: "Partly for his sake, partly for the party's sake, partly for his successor's sake. The Labour party is very bad at pushing bad leaders." Lord Hattersley said that that Chancellor was the perfect successor to Mr Blair.
"I think Gordon Brown increasingly becomes the ideal next leader of the Labour party," he said.
"I think what the Labour Party needs to win the next election is a solemn, serious, if you like, son of the manse.
"Somebody with visibly and almost ostentatiously contemptuous of spin who wants simply to say it as it is."
L ord Hattersley also expressed concern that the cash-for-honours allegations were "deeply damaging" to Labour. But he said he was sure Mr Blair and his personal fundraiser Lord Levy, who was arrested last week, were innocent.
He said he would be "astonished" if either the Prime Minister or Lord Levy were charged, but added: "The problem is that mud sticks and it's partly the idea in the public mind that somehow the Labour Party is associated with big business and easy money and millionaires - who aren't Labour, who aren't committed to our idea, but want to ingratiate themselves with the Government."