The National Coalition of Syrian opposition members said it had voted to force out its "interim government" and form a new one within a month.
Attempts to form a viable government-in-exile for Syria's opposition have been hamstrung by rivalries between its backers and among its members as well as by its inability to establish itself inside Syria.
The National Coalition is designated as the main body representing the opposition by the United States and other major powers.
But it has little influence over rebels fighting to overthrow President Bashar al-Assad.
The group said in a statement it was dissolving its interim cabinet to "create new ground for work on the basis of moving the government into the interior as soon as possible, and employing Syrian revolutionary capabilities".
Ahmed Ramadan, an opposition politician who was against the decision, said the move was rooted in a dispute between interim Prime Minister Ahmad Tumeh and the coalition's former president, Ahmad Jarba, over Mr Jarba's attempts to form a military government.
"Things are heading toward a crisis that will lead to weakening the opposition's position even more," he said, adding it would be "almost impossible" for an opposition government to work inside Syria, for security reasons.
"There is no clear strategy," he said.
Critics have accused Mr Tumeh of being ineffective, and he suffered a political defeat this month at a coalition general assembly meeting when he had to reverse his decision to fire the military wing's chief of staff.
The coalition statement said Mr Tumeh and other ministers would continue as caretakers until the new government was formed.
Nominations would be open for two weeks and a new government formed within 30 days.
The dissolution of the government comes two weeks after the group elected Hadi al-Bahra, a US-trained industrial engineer, to replace Mr Jarba after he served his maximum two six-month terms.
Meanwhile, eastern Damascus has been hit by its fiercest fighting in months between rebels and pro-regime forces, said the Syrian Observatory for Human Rights.
The air force meanwhile pounded rebel areas of the eastern neighbourhood of Jobar, as opposition fighters launched mortars into army-held parts of Damascus, wounding 18 people.
Jobar is important because it is located at the entrance to the besieged, rebel-held eastern Ghouta area on the outskirts of the capital.
It also neighbours Abbasiyeen, one of Damascus' main squares where the army "deployed tanks... and shelled rebel areas of Jobar," Abdel Rahman said.
Fighting in the area has intensified after a relative lull for months, after rebels launched an offensive and took an army checkpoint in Jobar.
The army has since reclaimed the checkpoint.
Rebel fighters fired mortar rounds at regime-controlled areas of Damascus, wounding 18 people, state news agency SANA reported.
The air force also pounded the nearby rebel-held areas of Irbin and Hammuriyeh, killing a man and a child, said the Observatory.
President Assad's regime has tried for more than a year to crush rebel positions near Damascus, and has deployed troops backed by Lebanon's Shia Hezbollah to fight in flashpoint areas.
Eastern Ghouta, used as a rear base by rebels, has been under army siege for more than a year, and was the scene of a massive chemical attack in August that killed hundreds.
In recent weeks, rebels in southern Damascus have also been fighting the jihadist Islamic State, after expelling it from four towns in eastern Ghouta, according to the Observatory.
Syria's war began as a peaceful movement for democratic change, but transformed into a civil war after the Assad regime unleashed a brutal crackdown on dissent.
The conflict has killed more than 170,000 people and forced nearly half the population to flee their homes.