The Walt Disney Co. CEO Michael Eisner said he would not renew his contract when it expires in two years, ending more than a year of shareholder unrest about his leadership and triggering what will likely be a hotly contested race to replace the controversial executive.

In a letter sent to the Disney board late Thursday, Mr. Eisner said, “I plan to retire from my role as chief executive officer of the company upon the conclusion of the term of my employment agreement on Sept. 30, 2006. Until then I shall continue to exert every effort to help the company achieve our goals, to assist the board in selecting a new chief executive officer, and to make the transition expeditious, efficient, and smooth and easy.”

Mr. Eisner then ended his letter with the quip, “I’m going to Disneyland!”

Wall Street’s response to the news has been muted so far, with Disney shares up just 1.4 percent, trading at $23.19 a share.

By announcing his resignation now, Mr. Eisner is likely in part trying to quell restive shareholders about both his leadership and his succession plans. Many shareholders over the past year have expressed dismay at Mr. Eisner’s apparent caginess about who will replace him.

In addition, a number of shareholders, including former Disney board members Roy Disney and Stanley Gold, have been pressing for Mr. Eisner to be ousted altogether from the company he has led since 1984. Mr. Eisner’s opponents have cited the company’s lackluster growth over the past years as well as persistent weakness at ABC as reasons for a change in the executive suite.

The fight came to a head at the company’s annual shareholders meeting in March after Mr. Eisner received a 45 percent no-confidence vote-the highest ever recorded for an executive in modern-day corporate America. The board of directors responded by stripping Mr. Eisner of his chairman title, creating the position of nonexecutive chairman and appointing board member George Mitchell to that position.

Yet even with that action by the board, the pressure to remove Mr. Eisner hasn’t let up, with Mr. Disney and Mr. Gold continuing their campaign to boot Mr. Eisner. Some sources said that the anti-Eisner duo is preparing to introduce later this year its own slate of board members to be elected at the company’s next board meeting.

By answering the burning questions among shareholders of if and when Mr. Eisner will step down, attention will now focus on who will replace Mr. Eisner.

While a number of names have been bandied about-including News Corp. Chief Operating Officer Peter Chernin, despite his having renewed his employment contract with the Rupert Murdoch-controlled media giant-many eyes are likely to focus on Mr. Eisner’s No. 2, Robert Iger.

In a Los Angeles Times article last week, Mr. Eisner effectively called Mr. Iger his likely successor, saying the executive has been groomed to easily assume the reins at Disney.

But selling that appointment to shareholders might not be easy. While Mr. Iger has taken a higher profile in recent months, addressing restive shareholders directly in some cases, there are still camps out there who believe Mr. Iger might not be up to the task of leading the company, pointing to Mr. Iger’s inability to turn around last-place ABC.