One of the state's longest serving treasurers called time on Monday after a decade in the job and 18 years in politics.
"It has been a great honour and a privilege to have the opportunity to serve," Mr Pallas told reporters on Monday.
"Renewal is important, and after 10 years as treasurer it is time for me to hand over the reins."
Mr Pallas was assistant secretary of the Australian Council of Trade Unions and chief of staff to former premier Steve Bracks before entering parliament in 2006.
His resignation comes just days after his mid-year budget update revealed a projected deficit of $3.6 billion in the 2024/25 financial year.
As Mr Pallas resigned, he said renewal is important. (Con Chronis/AAP PHOTOS)
Mr Pallas handed down his 10th budget in May, which revealed the government was delaying more than 100 already announced projects, including a plan to build a new Royal Melbourne Hospital and Royal Women's Hospital.
On Friday, he said net debt would reach $155.2 billion by July.
It follows increased spending on the Melbourne Metro Tunnel and a $1.5 billion injection into the state's hospitals.
Mr Pallas on Friday defended the deficit, saying the state will record a surplus the year after.
"Our economic future is secure," he said.
The treasurer announced his resignation alongside Premier Jacinta Allan, who thanked him for his 25 years of service.
When asked if he had any regrets on his time as treasurer, Mr Pallas said there were too few to mention.
"We can look back and say things could have been executed better, but that's acknowledging that we are all human," Mr Pallas said.
"My greatest regret is the financial capacity is a limitation on our ambition - my cabinet colleagues are great visionary people, and sometimes the treasurer has to pour cold water over those ambitions."
Ms Allan congratulated Mr Pallas on a long career.
"There is much to look back on and say thank you, Tim," Ms Allan said.
Australian Treasurer Jim Chalmers thanked Tim Pallas for his service to Victoria. (Lukas Coch/AAP PHOTOS)
Federal Treasurer Jim Chalmers said while he sometimes butted heads with Mr Pallas on certain issues, he would be sad to see his Victorian counterpart go.
Mr Pallas once complained Victoria was being short-changed on federal infrastructure funding, and complained his state was "the milking cow of the federation".
"He's made an enormous contribution to the state that he loves," Dr Chalmers.
"I can understand that after 10 years and 10 budgets, he's earned the right to put his feet up."
Mr Pallas will officially retire at the end of the week, his resignation will trigger a by-election in the seat of Werribee.
He joins a long list of Labor MPs who have left politics in recent years, including former premier Daniel Andrews.
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