In an email to her staff and obtained by KOMO News, Hammond said she will leave the agency on March 8.
"I leave with pride in knowing that we are regarded as one of the best and most progressive transportation agencies in the country," she wrote. "With the nation's largest and most iconic ferry system, an ambitious capital program capably delivered, and innovative strategies that are transforming our freeway corridors, we have much to celebrate."
Hammond's letter couched her leaving as a retirement, but multiple sources told KOMO News she was hopeful of being reappointed to the position.
Her agency has come under fire recently after several KOMO Problem Solver investigations revealed on-going problems with cracking and leaks in the concrete pontoons that will hold up the new 520 floating bridge.
The governor appointed Lynn Peterson to the transportation secretary post. Peterson is currently serving as the sustainable communities and transportation advisor to Oregon Gov. John Kitzhaber.
Inslee said Peterson will help the state develop an innovative approach to a transportation network that he believes is outdated and hampering economic growth.
"Lynn has the experience, creativity and leadership skills to help Washington build a transportation system for the 21st century," Inslee said. "And we'll do that in a way that more efficiently moves people and goods and reduces carbon emissions."
The appointment comes at a time that lawmakers are discussing a possible gas tax increase to fund transportation projects around the state.
Peterson has a background that has focused on transportation alternatives. She was previously a transportation advocate for 1000 Friends of Oregon, a land conservation group. She was also a planning manager at Trimet, which provides transit service in the Portland area.
Inslee's office said Peterson has recently been working in Oregon on issues like the state's portion of the West Coast network of electric-vehicle charging stations, and moving commercial vehicles to alternative fuels.
The Governor's office said the 520 bridge problems did not play into his decision to appoint Peterson, but says she will pay particular attention to mega-projects like the 520 Bridge, which is top of mind for many legislators.
Inslee also said he had chosen bank executive Carol Kobuke Nelson to lead the Department of Revenue, reappointed Scott Jarvis as director of the Department of Financial Institutions, and tapped Nicholas Brown to be his new General Counsel. Brown works for the U.S. attorney's office as an assistant U.S. attorney in the Terrorist & Violent Crimes Division.