French President Francois Hollande has ordered PM Manuel Vallsto form a new government after two senior ministers criticised their austerity policies.
After Mr Valls announced the cabinet's resignation, Mr Hollande immediately asked him to set up a new one.
Economy minister Arnaud Montebourg and education minister Benoit Hamon are expected to lose their jobs.
They had both called for France to tackle low growth by resisting fiscal discipline imposed by Germany.
Offering his and the government's resignation, the prime minister said Mr Montebourg, a left-wing MP, had crossed "a yellow line".
Moments later, the president issued a statement asking him to set up a new government "consistent with the direction [Mr Hollande] has set for the country".
A French presidential source said Mr Valls's decision had been a matter of "absolute consensus" between President Hollande and the prime minister.
Francois Hollande is sending a clear message: dissenters within the party will not be tolerated at this difficult economic moment.
But the decision to dissolve the government is also a sign of how much is at stake for him.
With unemployment running at more than 10%, growth stagnant, and polls suggesting that less than 20% of voters think he can turn the economy around, Mr Hollande is facing a difficult autumn.
His plan has been to cut spending in order to fund tax cuts for business, in the hope of boosting the economy, but there are those in his party who disagree.
They want less focus on austerity, and more money funnelled direct to households. Purging the rebels is an eye-catching move, but with his popularity at an all-time low, Mr Hollande cannot afford to look weak.