Speaking at the weekly cabinet meeting, Peretz said the state was undergoing "an earthquake in all fields- diplomatic, social and financial," and accused Netanyahu of acting irresponsibly, a statement from his spokeswoman said.
Peretz was to officially submit his resignation later today, the spokeswoman told AFP.
The former head of the powerful Histadrut labour union, who left Labour to join Justice Minister's Tzipi Livni's HaTnuah party before the latest election, has been a vocal critic of Netanyahu's social policies.
Peretz also said he would not support the state budget, which is to be tabled for parliamentary approval tomorrow.
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"I did everything I could to promote a diplomatic process and fight for the dignity of Israelis," he wrote on his Facebook page yesterday, saying there was "deterioration" on all fronts - diplomatic, social and economic.
"I have no intention of continuing to serve the policies of Netanyahu, who has become a prisoner to the right-wing," he said.
He said HaTnuah was part of the centre-left camp "which Labour will lead in the next elections until the regime is changed."
Peretz will be the second minister to quit the government this month after Interior Minister Gideon Saar, from Netanyahu's Likud party, stepped down from political life citing his desire to spend more time with his family.