Southee won six of his first 10 Tests in charge after succeeding Kane Williamson in December 2022 but then suffered 2-0 defeats at home to Australia in February and March and away to Sri Lanka last month.
Latham will now take the reins for a three-match series against India, starting in Bengaluru on October 16, as 35-year-old Southee, who has taken 382 wickets in 102 Tests, slots back into the rank-and-file.
Tom Latham is the new captain of New Zealand's Test team. (Dan Himbrechts/AAP PHOTOS)
"I've always tried to put the team first and I believe this decision is the best for the team," said Southee, who averaged 38.6 with the ball under his captaincy compared to 24.56 under Williamson.
"I believe the way I can best serve the team moving forward is focusing on my performances on the field and getting back to my best, to continue taking wickets and helping New Zealand win Test matches."
Latham, who has captained the Black Caps on nine previous occasions, will attempt to turn round New Zealand's fortunes but Southee's contributions were praised by coach Gary Stead.
"Tim's a fantastic player and a very good leader who is held in high regard," said Stead. "I'd like to acknowledge his humility in stepping down from the role as Test captain.
"He's one of our greatest ever players and we still very much see him playing a part in our Test side moving forward."
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