"The cabinet has decided to recommend imposition of president's rule in Jharkhand," the source told IANS.
The cabinet took the decision on the recommendation of Governor Syed Ahmed, the source said, adding the governor favoured imposing president's rule while keeping the assembly in suspended animation.
The source said that the cabinet decided to accept the governor's recommendation and refer the matter to the president for approval.
The JMM withdrew support to the Munda-led Bharatiya Janata Party-led coalition government Jan 7, following which Munda had sought the assembly's dissolution.
Congress and Rashtriya Janata Dal (RJD) delegations had, however, separately met the governor and requested not to accept Munda's recommendation.
A Congress leader said Thursday that the governor was bound to recommend president's rule after the fall of the government.
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"A governor is duty-bound to recommend president's rule if the government falls. The recommendation to keep it under suspension is aimed at exploring the possibility of formation of government," the leader, who spoke on the condition of anonymity, told IANS.
He said the party had not taken a final decision on forming an alternative government in the state in partnership with JMM and other parties.