The former minister, who became the youngest MP when she secured a by-election victory over Labour in Brent East in 2003, said her relationship with the party was broken.
A LibDem spokesman said it was "disappointed" by her decision - which comes a week before the annual party conference - and defended its "proud record" in the Coalition.
Explaining her decision to step down in 2015, Ms Teather pointed to the junior coalition partner's decision to back the Tories' planned cap on welfare, while she was in Government.
"It was the moment of realising that my own party was just as afraid of public opinion as the Labour Party. Something did break for me that was never, ever repaired," she told reporters. And she said she was "utterly desolate" when the LibDem leader, Deputy Prime Minister Nick Clegg, said some immigrants should be asked to pay a £1000 returnable "bond" when requesting a visa.
Following boundary changes, she won the Brent Central seat in 2010.
She joined the government ranks immediately after the formation of the coalition, as Minister of State for Children and Families, but lost her place to make room for the returning David Laws.