Paul Edgar Philippe Martin, PC (born August 28, 1938), also known as Paul Martin, Jr., is a Canadian politician who was the 21st Prime Minister of Canada, as well as leader of the Liberal Party of Canada.

On November 14, 2003, Martin succeeded Jean Chrétien as leader of the Liberal Party and became Prime Minister on December 12, 2003. After the 2004 election, his government retained power though it was reduced to a minority government. Forced by a confidence vote, the 2006 general election produced a minority government for the opposition Conservative Party, making Stephen Harper Prime Minister. Martin stepped down as parliamentary leader after the election, handing the reins to Bill Graham for the interim. Martin stayed on as party leader until he resigned on March 18, handing that post to Graham. Martin served as the Member of Parliament for the riding of LaSalle—Émard in Montreal from his election in the 1988 election to his retirement in 2008. He served as Minister of Finance from 1993 to 2002. He oversaw many changes in the financial structure of the Canadian government, and his policies had a direct effect on eliminating the country's chronic fiscal deficit by reforming various programs including social services. According to Canadian protocol, as a former Prime Minister, he retains the style "The Right Honourable" for life.

Martin was born in Windsor, Ontario. His father, Paul Joseph James Martin, a Franco-Ontarian of Irish and French descent, served thirty-three years as a member of the Canadian House of Commons, and was a Cabinet minister in four Liberal governments. His mother, Eleanor "Nelly" Alice (née Adams), was of Scottish, Irish, and Métis descent. He has one sister, Mary Anne. Martin grew up in Windsor and Ottawa. To give him the opportunity to improve his French, his parents enrolled him in a private French language middle school, École Garneau in Ottawa. He then briefly attended the University of Ottawa. Martin graduated from St. Michael's College at the University of Toronto with a B.A. in history and philosophy in 1961. He then attended the University of Toronto Faculty of Law, where he received an LL.B. in 1965. He was called to the Ontario bar in 1966.

In 1965, Martin married Sheila Ann Cowan, with whom he has three sons: Paul, Jamie and David.

In 1969, Power Corporation took a controlling share in Canada Steamship Lines. On December 2, 1970, Paul Martin, the 32-year old executive assistant to Power Corporation Chief Executive Officer (CEO) Maurice Strong, was appointed to the CSL board of directors. In 1971 CSL minority shareholders sold outstanding shares to Power Corporation, making CSL a Power Corporation subsidiary. At this time, CSL was given elevated status, where in the words of Power Corporation "...in order to increase its [Power Corporation's] own cash flow and take advantage of new federal tax regulations benefiting operating companies over holding companies, CSL took over most of Power’s investment portfolio at book value." CSL suffered losses in 1972 when forced to cover unexpected cost overruns in the construction of three 80,000-ton ocean-going tankers at Davie Shipbuilding. On November 22, 1973, Paul Martin was appointed President and CEO of the CSL Group. In 1974, CSL earnings were further hurt by an eight-week strike on the Great Lakes. In 1976, Power Corporation reversed itself and took over the investment portfolio which had been sold to CSL five years earlier. CSL reverted to an operating division of Power Corporation at this time. On June 7, 1981, CSL President and CEO Paul Martin announced plans to expand outside of the Great Lakes and St. Lawrence River: "The Great Lakes are essentially a Canadian pond... Canadians have captured 95 percent of the business. Now we want our chance to try our wings on the oceans."

One month later, in July, 1981 Power Corporation announced it was selling its subsidiary CSL Group for $195 million (CAD). CSL Group at this time included the shipping company, shipyards, engineering firms, and a bus service (Voyageur, previously known as Provincial Transport). The following month in August, 1981, Paul Martin and his friend Laurence Pathy secured financing and announced their intention to purchase CSL Group Incorporated for the price advertised by Power Corporation. On August 9, 1983, citing federal government interference in the shipping industry, Martin stated: "then... they are going to come in with some grand and glorious package that will give the government control of the industry because they don't understand private enterprise." By the mid-1980s, CSL's only remaining shipyard (Collingwood) was undergoing financial difficulties and was closed on September 12, 1986, with the loss of 800 jobs. At the same time, CSL Group Inc.'s expansion outside of Canada was well underway. Martin was elected as a Member of Parliament in November 1988 and resigned as President and CEO, stepping aside from directing the day-to-day operations of the company. In March 1991, following changes to Canada's taxation laws regarding international earnings, CSL backed away from threats to move its headquarters outside of Canada, however in December the president who replaced Martin resigned in opposition to plans to move international operations outside the country. Replacement management in April, 1992 formed a new CSL Group Inc. subsidiary headquartered in Massachusetts to be called CSL International Inc. Canada Steamship Lines Inc. would remain as the Canadian operation under CSL Group Inc., and the conglomerate would remain headquartered in Montreal.

In November 1993, the newly re-elected Paul Martin was appointed to the cabinet and named Minister of Finance. On February 1, 1994, Martin placed his shares in CSL Group Inc. under a "Supervisory Agreement" to be managed by lawyers and financial advisers, although he would be allowed to intervene in company decision-making should events warrant. In June 2002, Martin was dismissed from the cabinet as Minister of Finance and subsequently pursued a bid for leadership of the Liberal Party of Canada. On March 11, 2003, Martin bowed to public and media pressure on his interest in CSL Group Inc. and announced that he would sell his interests in the company to his three sons, saying that his ownership would "provide an unnecessary distraction during the leadership race."

On December 12, 2003, Martin became the Prime Minister of Canada. On January 28, 2004, the federal government, in response to opposition party and media enquiries, revealed that CSL Group Inc. had received $162 million in federal government contracts, grants and loans since Paul Martin became Minister of Finance in 1993. Earlier figures released in 2003 had suggested CSL Group Inc. had only earned $137,000 during this time period. Throughout the 1990s, CSL Group Inc. oversaw the reflagging of several former Canadian-registered vessels which were placed under the shipping registries of nations commonly referred to as flags of convenience, where safety and labour laws were relaxed to be more business-friendly. This was often criticized by Martin's political opponents.

In 1984, the Liberal Party was defeated under the leadership of John Turner, falling to just 40 seats. Many Liberals looked to replace Turner with a political newcomer. A group of young Liberals approached Martin as a possible candidate, and while he did not take part in an attempt to overthrow Turner, he did prepare to succeed him in the leadership should the position open. Martin was considered by many to be Turner's ideological successor, as Jean Chrétien was to Pierre Trudeau. In 1988, Martin was elected as the Member of Parliament for the Western Montreal riding of LaSalle-Émard. He was reelected at every election since then without much difficulty.

He was a candidate at the 1990 Liberal leadership convention, losing to Jean Chrétien in a bitter race that resulted in lasting animosity between the two men and their supporters. A key moment in that race took place at an all-candidates debate in Montreal, where the discussion quickly turned to the Meech Lake Accord. Martin, favouring Meech, attempted to force Chrétien to abandon his nuanced position on the deal and declare for or against it. When Chrétien refused to endorse the deal, young Liberal delegates crowding the hall began to chant "Vendu" - ("sellout" in French) and "Judas" at Chrétien. Chrétien blamed Martin for allegedly inciting the response from the floor and another similar outburst by Martin supporters at the convention when Chrétien accepted the party leadership, though Martin denied it. In particular, it resulted in Chrétien being personally unpopular in his home province, even though the majority of Canadians opposed the Accord. Jean Lapierre and his supporters, who were in favour of Martin, wore black armbands at the convention to protest Chrétien's victory. The Meech Lake Accord was officially defeated, just one day before the Liberal leadership was to be decided. In the House of Commons, Lapierre then crossed the floor to the newly formed Bloc Québécois. After the leadership convention, Martin co-authored the election platform "Creating Opportunity," colloquially known as the Red Book. The Liberal Party won a landslide majority government in the 1993 election.

After the Liberals formed the government, Martin was chosen as Minister of Finance by Prime Minister Chrétien, and appointed by Governor General Raymond Hnatyshyn. At the time, Canada had one of the highest annual deficits of the G7 countries. As finance minister, Martin erased a $42 billion deficit, recorded five consecutive budget surpluses, and paid down $36 billion of national debt. During his tenure as finance minister Martin was responsible for lowering Canada's debt-to-GDP ratio from a peak of seventy per cent to about fifty per cent in the mid-1990s. In December 2001, he was named as a member of the World Economic Forum's "dream cabinet." The global business and financial body listed Martin along with United States Secretary of State Colin Powell and United Nations Secretary-General Kofi Annan as top world leaders. Also during his tenure as finance minister, Martin coordinated a series of meetings between the finance ministers of all provinces to discuss how to address the pending crisis in the Canada Pension Plan (CPP). Consequently, Martin oversaw the creation of a general public consultation process in February 1996 that eventually led to major structural reform of the CPP. The results of this public consultation process were collected and analyzed by the Finance ministry. Eventually, it led to a proposal for overhauling the CPP, which was presented to Parliament and was approved soon after, thereby averting a pension crisis if left unaddressed.

While Martin's record as finance minister was lauded in business and financial circles, there were undeniable costs. Some of these costs took the form of reduced government services, affecting the operations and achievement of the mandate of federal and provincial departments. This was probably most noticeable in health care, as major reductions in federal funding to the provinces meant significant cuts in service delivery. Martin's tactics, including those of using surplus funds from pension plans and Employment Insurance, created further controversy. Prime Minister Chrétien and Martin frequently clashed while in office. It was often reported that Chrétien privately often condemned Martin in bitter terms to aides and that he had never forgiven Martin for running against him in the Liberal leadership convention of 1990. Even before the Liberals' second electoral victory in the 1997 election, there was much speculation in the media and in Ottawa that Martin was after Chrétien's job and wanted to force the Prime Minister to retire. As the Liberals emerged with a smaller majority government after the 1997 election, though it was unlikely that any opposition party could pose a serious challenge, Martin began to gain support from those who began to disagree with Chrétien. Chrétien, however, resolved to stay on after the Liberals were re-elected in 2000, having regained much of the ground lost in 1997. By this time, Martin had gained control of much of the party machinery. The conflicts between the two men reached a peak in 2002. Martin left Cabinet, being replaced by John Manley as Finance Minister. There is some question on whether Martin resigned or Chrétien had him dismissed. Being out of Cabinet was likely a boost to his campaign as he was no longer obligated to disclose his donors. Soon after, Martin formally declared his intention to run as leader of the Liberal Party at the next party convention. Over the summer of 2002, Martin toured the country campaigning to succeed Chrétien while his Liberal organizers prepared to challenge Chrétien's leadership during a review vote in January 2003. During the fall, Chrétien announced that he would step down in the spring of 2004 after less than half of caucus agreed to sign a commitment supporting him. The Liberal party called a leadership convention for the fall of 2003, to be held in Toronto.

Several other potential leadership contenders, such as Brian Tobin and Allan Rock, declined to enter the contest. John Manley's attacks on Martin's refusal to disclose his campaign contributors did little to dent the latter's commanding lead and Manley eventually conceded the race. This left no strong candidate for Chrétien supporters to rally around, and some of them grudgingly voted for Martin. On September 21, 2003, he easily defeated his sole remaining opponent, former Deputy Prime Minister Sheila Copps by securing ninety-three per cent of the party delegates from across the country. On November 14, 2003, he was formally declared the winner at the Liberal leadership convention, capturing 3,242 of 3,455 votes. He had won the leadership almost unopposed, due to his hold on the party machinery, and because Chrétien supporters did not rally around either of the leadership opponents.

On December 12, 2003, he was formally appointed by then Governor General Adrienne Clarkson as the twenty-first Prime Minister of Canada. When sworn in as Prime Minister, Martin held the flag that flew on Parliament Hill when the elder Martin died. Both father and son had served as cabinet ministers and contested the Liberal leadership on multiple occasions; their attempts from 1948 to 1990 were unsuccessful. Martin's election as leader and becoming Prime Minister was described as fulfilling a family dream. Both also earned the honorific prefix The Right Honourable. One difference between them was that Paul Sr. was one of the most left-wing members of the party, while Paul Jr. is considered to be on the right wing. When he was sworn in, Martin's new cabinet retained half the ministers from the Chrétien government. Martin and his supporters exercised control over the riding nomination process, breaking with the precedent to automatically sign the nomination papers of backbenchers and former ministers who wanting to run for re-election. While these were signs of open party infighting, this had little impact on Martin's record popularity, with several pundits suggesting that the cabinet change was meant to present a new government different from Chrétien's ten-year tenure.

Martin and the Liberals were adversely affected by a report from Auditor General Sheila Fraser on February 9, 2004, indicating that sponsorship contracts designed to increase the federal government's status in Quebec resulted in little to no work done. Many of the agencies had Liberal ties, and roughly $100 million of the $250 million in program spending went missing. The scandal hurt Martin's popularity, especially in Quebec, where Bloc Québécois leader Gilles Duceppe even accused Martin of planning to widen the St. Lawrence seaway to benefit his own Canada Steamship Lines. The scandal also cast skepticism on Martin's recommendations for Cabinet appointments, prompting speculation Martin was simply ridding the government of Chrétien's supporters to distance the Liberals from the scandal. Martin acknowledged that there has been political direction but denies involvement in, or knowledge of, the sponsorship contracts. He had a judicial inquiry called to investigate what has come to be known as the Sponsorship Scandal, and nominated John Gomery to head it.

The Liberals were facing a united Conservative Party led by Stephen Harper, while the Bloc Québécois and NDP were also buoyed by the Sponsorship Scandal. Martin advised Governor General Adrienne Clarkson to call an election for June 28, 2004. An unpopular provincial budget by Liberal Premier Dalton McGuinty hurt the federal party's numbers in Ontario, as did a weak performance from Martin in the leaders' debates. The Conservatives would soon take the lead, prompting some predictions of an imminent Harper government. The Liberals managed to narrow the gap and eventually regain momentum. Martin was successful in winning a plurality of seats to continue as the government, though they were now in a minority situation, the first since Joe Clark's tenure in 1979-80.

The Martin government faced combined challenges from Quebec separatism and general hostility arising from the Sponsorship Scandal. The first test of the Liberal minority came following the Speech from the throne on October 5, 2004. The Conservatives announced plans to move an amendment to the speech. In this they were supported by the separatist Bloc Québécois and the New Democratic Party. The fall of the government was averted only after agreement on a watered-down version of the amendment.
At the First Ministers' Meeting of September 13 - September 15, 2004, Martin and the provincial premiers reached an agreement on increased funding for healthcare. It was not a "deal for a generation" as promised in the election, but it was a decade-long financial commitment that was expected to lower the heat in federal-provincial relations, which had worsened during Chrétien's time in office. Martin also introduced changes to the equalization program, under which the Federal Government is constitutionally obligated to redistribute federal revenue to provinces having less ability to raise revenues through taxation than wealthier provinces. The goal in doing so is to ensure uniformity of public service provision across the nation. This was received positively in "have not" provinces, but Nova Scotia and Newfoundland and Labrador sought to retain income from natural resources on federal marine territory that would generally be taken, or 'clawed back' by the federal treasury in lieu of equalization payments. In the 2004 federal election campaign, Harper provided in writing a promise that the provinces of Newfoundland and Labrador and Nova Scotia under a Conservative government would receive 100 per cent of the revenue generated from their natural resources without an equalization clawback, a promise he later reneged upon when elected as Prime Minister. NDP leader Jack Layton followed suit soon after with a similar guarantee, and later Martin promised that under a Liberal government both provinces would receive the same deal, except only for oil resources. Negotiations over the agreement would be harsh, with Newfoundland and Labrador Premier Danny Williams, at one point ordering all Canadian flags removed from provincial government buildings in December, 2004. The dispute was resolved when the federal government agreed to Martin's original campaign promise.

Same-sex marriage proved to be a defining issue of Martin's mandate. Martin opposed same-sex marriage in a 1999 vote on the issue along with a majority of MPs, but changed his stance on the issue in 2004, citing recent court rulings and his personal belief that same sex marriage was primarily a human rights issue. In the midst of various court rulings in 2003 and 2004 that allowed for the legalization of same-sex marriages in seven provinces and one territory, the government proposed a bill to legalize same-sex marriage across Canada. The House of Commons passed the Civil Marriage Act in late June 2005 in a late night, last-minute vote before Parliament closed down, the Senate passed it in July 2005, and it received Royal Assent on July 20 of the same year. This made Canada the fourth country in the world to allow same-sex marriages.

Martin also negotiated a ten year, $41 billion dollar plan to improve health care and reduce wait times. He signed agreements with all provinces to establish a national early learning and child care program. In November 2005, the Martin government reached a historic consensus with Canada's provinces, territories, First Nations, Métis and Inuit people. Known as the Kelowna Accord, this aimed to eliminate the gaps between Aboriginal and non-Aboriginal Canadians in the areas of health, education, housing and economic opportunity.

The 2005 federal budget was presented in the House of Commons on February 23, 2005. The budget included an array of new spending for the Armed Forces, the environment and for a national child care program.

Public hearings of the Gomery Commission inquiry into the sponsorship scandal involving alleged kickbacks and "donations" from Quebec advertising agencies and corporations to Liberal Party operatives led to a drop in the Liberal Party's popularity. The security of the minority government came under fire as the Conservatives threatened to force an election by use of their "opposition day," when they get to set the Parliament's agenda. The Conservatives would use this time to hold a vote of no confidence in order to topple Martin's government. To avoid this, Martin removed all opposition days from the schedule and made a televised appearance on April 21, 2005, to attempt to gain support from the Canadian people to let the inquiry run its course before an election is called. In the rebuttal speeches by the opposition party leaders, Layton offered his party's support provided that they were given major concessions in the budget such as canceling the proposed corporate tax cuts. Days later, the Liberals took the NDP up on their offer and negotiated tax cut deferments and new spending initiatives. Among the new commitments was aid for Sudan, which Sudan's officials turned down as Martin did not consult them about it beforehand. This aid was attacked as a perceived attempt to win the vote of a single independent MP, former Liberal David Kilgour. Kilgour nevertheless would vote against the government.

In May, Parliament passed a motion asking one of its committees to express a lack of confidence in the government. The Liberals dismissed this as a procedural matter, causing some to accuse them of governing unlawfully by ignoring parliamentary tradition. The Conservatives and Bloc interpreted it as a vote of no confidence, and they combined their votes to shut down the House of Commons early for two days in a row. The Speaker of the House of Commons later ruled in favour of the Liberal stance. On May 17, 2005, MP Belinda Stronach crossed the floor from the Conservative Party and joined the Liberal Party to become Minister of Human Resources and Skills Development. Martin claimed Stronach's move was due to concerns over the direction the Conservative Party was taking, while others accused Stronach of political opportunism. This event changed the balance of power in the House of Commons in favour of the government. This, and the support of independent MP Chuck Cadman, caused a tie during a May 2005 confidence vote, meaning that Peter Milliken, Speaker of the House needed to cast the deciding vote. He voted with the government, following the tradition that the Speaker votes to continue debate, and that allowed the budget to pass through the House on May 19, 2005.

On February 24, 2005, Foreign Affairs Minister Pierre Pettigrew told the House of Commons that Canada would not participate in the American National Missile Defense Program, and that he expected to be consulted in the case of a missile being launched over Canadian air space. Martin's decision came with much praise, but others saw that the government was distancing itself from the U.S. His government continued to cooperate with the United States on border control, refugee claimants, and defence, and he appointed seasoned Liberal politician Frank McKenna as Canada's ambassador to Washington.

Martin was criticized for failing to reach a foreign-aid target of 0.7 per cent of GDP, most notably by Bono of Irish rock group U2 (who claimed that he was going to "kick [Martin's] butt," over the issue). Martin later responded that, in his view, many foreign leaders had made pledges that were too fanciful and that he would only commit to targets that he knew his government could be held accountable for.

Martin promoted the expansion of the G8 into a larger group of twenty nations G20. He also forged a closer relationship with the People's Republic of China by announcing the strategic partnership initiative during PRC President Hu Jintao's state visit to Canada in September, 2005.

On August 4, 2005, the government announced that Martin had advised Queen Elizabeth II to appoint Michaëlle Jean as Governor General. The reception to the appointment was mixed: some, including Harper, applauded the move, while accusations that her husband had both dined with former members of the terrorist organization, FLQ, and had been supportive of Quebec separatism in the past surprised others. Subsequent to her appointment she reaffirmed her commitment to federalism and the issue died down.

The first volume of the Gomery Report, released on November 1, 2005, cleared Martin of any wrong doing while placing some blame for the scandal on former Prime Minister Jean Chrétien for lack of oversight, although it acknowledged that Chrétien had no knowledge of the scandal. On June 26, 2008, Chrétien was subsequently cleared of all allegations of involvement in the scandal. However, many have criticized the Gomery Inquiry as not having the scope to assign criminal responsibility for the Scandal or to investigate Martin's role, and indeed some have accused Martin of purposely "tying Gomery's hands." Gomery specifically said that Martin "is entitled, like other ministers from the Quebec caucus, to be exonerated from any blame for carelessness or misconduct", as the Department of Finance's role was not oversight, but setting the "fiscal framework". A Canadian judge issued a gag order that barred Canadian media from covering the hearings of the Gomery Inquiry. Despite this ban, leaked information circulated after being published in an American blog.

After the Gomery findings, NDP leader Jack Layton notified the Liberals of conditions for the NDP's continued support, one of which included a ban on private health care. Martin turned down the offer, as well as rejecting an opposition proposal schedule an election for February 2006, in return for passing several pieces of legislation. The Conservatives, supported by the other two opposition parties (the NDP and Bloc Québécois), introduced a motion of non confidence against the Martin government. The motion passed on November 28 by a count of 171–133, defeating the government, after which the Governor General issued the election writs for a vote to be held on January 23, 2006. The motion was notable in that it was the first time a ruling government had been defeated on a non-confidence motion not associated with any legislation; previous defeats of minority governments in Canada had occurred in connection with the failure of financial legislation, such as budget bills in the case of Joe Clark and Pierre Trudeau or supply in the case of Arthur Meighen. Some commentators described his tenure as Prime Minister as unfocused and indecisive, with the The Economist referring to him as "Mr. Dithers".

For Martin and the Liberals, the 56-day campaign entailed an emphasis on choosing a vision of Canada different from that of the Conservatives, centering on issues of health care, daycare, tax cutting, and national autonomy. Instead, the campaign focused on the perception of corruption within the Liberal Party, stemming from revelations of details regarding the Sponsorship Scandal. Martin became involved in a diplomatic row with the United States administration after accusing, with Bill Clinton, the US of not listening to global environmental concerns. Martin rejected the US Ambassador David Wilkins' rebuke and stated that he was standing up for Canada's interests over softwood and other issues. Wilkins, Conservative Leader Stephen Harper, and NDP leader Jack Layton accused Martin of orchestrating a row with the US in order to garner public support during an election campaign and noted that Canada's record in cutting carbon dioxide emissions is worse than that of the US. Prior to the campaign and upon dropping of the writs, opinion polling indicated the Liberals were ahead of the Conservatives by 2-10% popular support (November 30, 2005: Liberals 35%, Conservatives 30%). However, the Liberal lead did not last. They did not plan much serious campaigning during December, allowed the Conservatives to take the initiative in rolling out policy ideas. Several early gaffes were picked up by an unsympathetic media. One notable gaffe was Liberal Party strategist Scott Reid's suggestion that parents might buy beer and popcorn with the Conservative's child care subsidy, although Martin declined to apologize. Martin was also criticized for portraying himself as the defender of Canadian unity; some opponents pointed that this election was not a referendum while others pointed to the Sponsorship Scandal. Near the end of December, the Liberals were rocked by a Royal Canadian Mounted Police criminal investigation into the leaking of news of a federal tax change for income trusts. This again brought the Sponsorship Scandal into public attention, at the time when Martin planned to make important policy announcements. Under constant campaign pressure by all opposition parties casting Martin and the Liberals as corrupt, Liberal support fell to as low as 26% in the early weeks of January 2006. Martin did not put in a strong performance during the televised campaign debates. While appearing passionate in his message, he stuttered in making statements and appeared somewhat flustered. During one debate, Martin made a surprise pledge that he would eliminate the notwithstanding clause, while the Conservatives pointed out that this was not one of the announced Liberal campaign promises. Political analyst Dave Docherty indicated that Harper appeared most prime ministerial in the debates. In an attempt to sway voter sentiment in the final two weeks of the campaign, the Liberals prepared a series of attack ads. One unreleased ad was seen widely as disrespectful of the military and it not only overshadowed the other ads but also forced Martin to defend the controversial ad instead of releasing new policies. During the last week, Martin was forced to defend Harper after the latter was called a separatist by Canadian Auto Workers union leader Buzz Hargrove. In another tactic similar to the 2004 campaign, Hargrove urged all progressive voters to unite under the Liberal banner in English Canada and the Bloc Québécois in Quebec to stop the Conservatives, hoping to attract voters who were leaning towards the NDP, but New Democrat leader Jack Layton responded by focusing his attacks on Liberal corruption.

In the end, the Conservatives won a plurality of support and seats, finishing 31 seats short of a majority. The Liberals held their base of support in Ontario, with 54 seats of the 103 in the province. The Liberals lost a number of seats in Quebec: winning only 13 of the 75 seats in the province, down from 21 in 2004, while the Conservatives won 10 seats there. The Liberals did not improve their standings in the Western provinces, winning only 14 of the 92 seats, the same number as in 2004. Shortly after midnight on January 24, 2006, after it became clear that the Conservatives were on their way to a plurality, Martin conceded defeat. (Near the end of the 2004 election, Martin and Harper both pledged that they would not form a government unless they won a plurality of seats.) Martin surprised many by announcing his resignation as party leader, saying "I will continue to represent with pride the people of LaSalle—Émard, but I will not take our party into another election as leader." The next day, Martin officially informed Governor General Michaëlle Jean of his intention to resign as prime minister. Jean formally asked Harper to form a government later that day. Martin remained as prime minister until the Harper minority government was sworn in February 6, 2006.

Choosing not to take on the office of Leader of the Opposition, Martin stepped down as parliamentary leader of his party on February 1, and the Liberal caucus appointed Bill Graham, MP for Toronto Centre and outgoing Defence Minister, as his interim successor. Martin temporarily remained nominal party leader, though. The party's national executive accepted Martin's resignation as Liberal leader on March 18, 2006, handing the post to Graham for the interim. In doing so, Martin became the shortest serving non-interim leader of the Liberal Party since Confederation — serving for less than two-fifths the time (2,197 to 855 days) of the next shortest serving leader, John Turner (1984–1990). Martin has since been surpassed as the shortest serving non-interim leader of the Liberal Party of Canada by Stéphane Dion who served for 740 days (2006-2008). At the same meeting Martin tendered his resignation, the date for the leadership convention to select his successor was set for the weekend of December 2–3, 2006. According to media reports, Martin decided to move up the date of his resignation to end speculation that he might lead the Liberals into another election if Stephen Harper's minority government were to fall prior to the Liberal leadership convention. At the Liberal convention in Montreal, Martin was officially neutral in the contest. The party's tribute to Martin was hosted by former Olympian Mark Tewksbury. Martin's press secretary denied that the tribute was low key due to the Sponsorship Scandal and lingering bitterness inside the party, saying that the former prime minister wanted a simple evening. In his farewell speech, Martin paid homage to Chrétien, though the latter was not present for the event, and urged the Liberals to emerge united from the convention. Stéphane Dion was elected Liberal leader from a field of eight candidates.

For his last years of public office after resigning as Prime Minister, Martin was a backbencher and appeared infrequently in the House of Commons, instead devoting his time to projects related to improving educational opportunities for Aboriginals and protecting the Congo Basin rain forest. In the 2008 federal campaign, Martin did not run for re-election to Parliament. CTV in November 2008 reported that Martin would be a member of a four-person council of economic advisers to a hypothetical coalition government formed by the Liberals and the NDP if they succeed in toppling the Harper government. However, the proposed coalition ending up came to nothing, as outgoing Liberal leader Stéphane Dion was immediately forced out and replaced by Michael Ignatieff, who quickly distanced the party from the coalition.

Martin published his memoirs, entitled Hell Or High Water: My Life In And Out of Politics, in late 2008. The book, published by McClelland & Stewart, draws heavily upon interviews conducted by Sean Conway, a former Ontario Liberal provincial cabinet minister, which were carried out for the National Archives of Canada.