An aide to president Mahmud Abbas said prime minister Rami Hamdallah "handed his resignation to Abbas", but confusion reigned over when the government was likely to dissolve.
It was also unclear what the next cabinet might look like, reflecting the chaotic period for Palestinian politics.
Discussions on forming a new government would include consultations with the various Palestinian factions, including the Islamist Hamas, aide Nimr Hammad said.
The government of technocrats was formed last year to replace rival administrations in the Gaza Strip and the West Bank.
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"I think what's coming now is the formation of a government with politicians, not a government of technocrats."
Abbas's spokesman Nabil Abu Rudeina said the PLO's executive committee would hold a meeting Monday, attended by Hamdallah, to discuss the "forming of a national unity government", but did not elaborate.
Officials said the move had been under discussion for several months because of the cabinet's inability to operate in Hamas-dominated Gaza.
But Hamas rejected any unilateral dissolution of the unity government and said it had not been consulted.
"No one told us anything about any decision to change and no one consulted with us about any change in the unity government."
Senior Hamas official Ziad al-Zaza, however, struck a more conciliatory note, calling on Abbas "to form a unity government with all national and Islamic factions to face Israeli occupation".
Riyad al-Malki, foreign minister in the outgoing government, said "the prime minister always wanted to incorporate new ministers.
"At the end of the day it's not going to change anyway our position when it comes to peace and our commitment towards peace with Israel, our responsibility regionally and internationally fighting terrorism," he said in Prague.
The move comes at a critical time, with Hamas sources saying it is holding separate, indirect talks with Israel on ways to firm up an informal ceasefire that last August ended a 50-day war in Gaza.