The decision came after PM Mario Draghi handed in his resignation as a result of key right-wing coalition allies, the Five-Star Movement, boycotting a confidence vote.
Italy is set to hold a general election this autumn after President Sergio Mattarella formally dissolved parliament.
The decision came after Prime Minister Mario Draghi handed in his resignation as a result of key right-wing coalition allies boycotting a confidence vote.
Draghi, an economist and former president of the European Central Bank, will remain on to lead a caretaker government.
The elections -- due to take place on 25 September --- will be the second in Italy in four years.
"The government has tendered its resignation [...] I thanked Mario Draghi and the ministers for their commitment over these 18 months," Mattarella said on Thursday at the Quirinale Palace.
"The government is encountering limitations in its activities, but it has the tools to operate in these months before the new executive arrives."
"There are many tasks to be completed in the interest of Italy," he added.
Draghi's caretaker government decided on the date of the general election soon after, settling on last Sunday in September.
While he could not keep his fractious coalition together, Draghi appeared to have maintained broad support among the Italian public, many of whom pleaded with him to stay on.
Italian newspapers on Thursday were united in their outrage at the surreal outcome of his resignation and snap elections.
“Shame,” read the front page of La Stampa. “Italy Betrayed,” said La Repubblica.
Italy is waiting to implement its European Union-funded pandemic recovery programme at a time of inflation and economic uncertainty related to the war in Ukraine.
Mattarella has called for the political crisis to be resolved as soon as possible to guarantee "the increasingly necessary collaboration at the European and international level."
"I hope, even in the intense dialectic tone of the election campaign, for a constructive contribution in the best interests of Italy."