I just did this about 2 weeks ago. He was a really nice guy but we just didn't see eye to eye on some things. I agree with the previous posts. Being honest and considerate are very important. U can start out by saying I think we might be better as friends than in a dating relationship. If appropriate you can say that it's noones fault but that's just how your feeling. Then ask how he feels about it. This can at least start the conversation. Good luck
If he asks you why, tell him why and be totally honest, don't make something up on the spot. Tell him he's a good guy (point out all the good qualities in him) and just because it didn't work out between you two, doesn't mean he won't find some other amazing girl, tell him there's a rockin girl in his future. Just be honest and considerate like everyone else said, that is key. Oh yeah, and do it in person, not over text or Facebook or something like that.
Chris Brown sung a song...."There's never a right time to say goodbye" He was right. There's never a nice way to break up with someone. Just don't do it over a text message, don't have someone else do it, and don't break up with him over an answering machine. You'll be fine :)