The South Belfast representative, who originally won the seat in 2007, said she was confident Alliance would have excellent candidates to replace her in the next Assembly election, scheduled to be in May.
Ms Lo added she had been thinking about the decision for some time.
“I had never realistically looked beyond doing two terms, given my age. It was always on the cards but I made a final decision on my future over the past year. I have worked hard as an MLA and had some influence at the Assembly, particularly around raising awareness of gender equality, ethnic minority and environmental issues, but I feel the next election is the correct time to leave my role.
“People have asked me whether racism played a part in my decision. While it did not, unfortunately racism has always featured in my life, whether as a representative of ethnic minority organisations or as MLA. I have always made sure to speak out against it, raising awareness of it as a problem in Northern Ireland and that is something I will continue to do after I finish at the Assembly.
“When I was first elected, there was optimism around politics here, with the new power-sharing administration giving people optimism. That has faded with crisis after crisis, which is why the current talks need to tackle the reasons for that. I have a few months left as an MLA and in that time, I want to play my part in helping make things work again. That would be the best legacy for Northern Ireland.”