Stuart used his Sunday newspaper column to confirm he would not be seeking re-appointment for the 2013 series following his appointment as coach of NRL club Parramatta.
"As of right now, I am no longer the NSW coach," said Stuart, the former Australia boss who succeeded New Zealand head coach Stephen Kearney at the Eels. "It is one of the toughest decisions of my coaching career."
Stuart fronted NSWRL officials last week in a last-ditch bid to convince them he could handle both roles but left feeling he did not have their full support.
The Blues' hierarchy was reluctant to back-track on their policy of choosing a coach with no club affiliation.
The Blues won just two games in six under Stuart as Queensland stretched their dominance to seven straight series wins but he believes the gap between the two sides has been significantly narrowed.
"The Blues are not far away," he said. "We're starting to get it."