'The cabinet has resigned in line with the Constitution,' said Prime Minister Bohuslav Sobotka, whose Social Democrats formed the cabinet with the populist ANO movement and the centrist Christian Democrats.
President Milos Zeman will name ANO leader and billionaire Andrej Babis prime minister on December 6, following the movement's landslide win in October. On December 13, Zeman is due to appoint the EU member state's new cabinet.
Josef Mlejnek, a political analyst at Charles University in Prague, praised Sobotka's government for the country's economic boom and for bringing unemployment down to the EU's lowest rate.
Sobotka is only the third prime minister since the Czech Republic became an independent state in 1993 to complete his four-year term.
'The cabinet's record in history will be much worse than it deserves,' Mlejnek told AFP.
'Its reputation has been tarnished this past year because of infighting ahead of the election.'
Earlier this year, Sobotka announced his cabinet would resign but then thought better of it, making Babis step down as finance minister following allegations of his murky business dealings.
With its an anti-corruption, anti-euro and anti-migrant campaign, ANO won 78 of 200 seats in parliament ahead of the right-wing eurosceptic ODS, the anti-establishment Pirates, the far-right SPD and five other parties.
But, snubbed by most potential partners, Babis has been forced to form a minority government which will find it hard to win a confidence vote in parliament.
Political rivals are suspicious of the 63-year-old Slovak-born chemicals, food and media tycoon because of his communist past and recent police charges.
Babis is facing fraud charges for allegedly pulling his Stork Nest farm out of his sprawling Agrofert holding in 2007 to make it eligible for an EU subsidy granted to small companies, before eventually returning it to the holding.
Police have asked parliament to strip Babis of immunity as a lawmaker for a second time - the previous parliament stripped him in September but Babis regained his immunity when re-elected in the October vote.
If the new cabinet fails to win a confidence vote, Zeman has said he will give political ally Babis a second chance.