DB Regio took over running trains and stations in 2010.
But Nexus has announced that from April 2017 it will manage all operations directly to prepare for "significant" future changes.
The RMT union said it would be pressing for the Metro to remain in public ownership.
Nexus wants approval from the North East Combined Authority to manage Metro operations directly until 2019.
After this a new contract would begin when more than Â£400m is invested in a new train fleet.
Nexus managing director, Tobyn Hughes, said: "The future of the Tyne and Wear Metro holds a major investment in a new fleet of trains, and we need to prepare the business for that.
"The current contract that expires in March 2017 is not delivering the outcomes for passengers that either we or the operator wants to see. As a result we propose not to exercise our option to extend it beyond its natural expiry date."
Nexus said it has agreed an investment package with DB Regio to deliver improvements in fleet performance and customer service over the final year of the contract.
General secretary of the RMT, Mick Cash said: "Today's announcement is a massive boost in the battle for public ownership... RMT will now press for the initial two-year transition to be turned into a permanent arrangement for this essential public service."
The contract to run the Tyne and Wear Metro with German company DB Regio will not be renewed next year in favour of Nexus taking direct control.