Lonsdale addressed the nation late Tuesday, calling the situation a "man-made disaster", the Vanuatu Post reported.
It said the president announced he was using his constitutional powers to dissolve parliament and call an election on a date yet to be set.
Lonsdale said a "political impasse" was paralysing the impoverished Pacific nation's government after 14 lawmakers were jailed last month over a bribery scandal.
He said attempts to forge a government of national unity including government and opposition lawmakers had failed, forcing him to act.
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"Service delivery cannot reach the people because of the lack of good governance principles and... Strong leadership."
The constitutional crisis erupted last month, when the 14 lawmakers were convicted on bribery charges and hastily tried to pardon themselves.
Lonsdale was overseas at the time and parliamentary speaker Marcellino Pipite, using his powers as acting president, issued pardons for himself and his co-conspirators.
An angry Baldwin restored the convictions on his return, vowing in a televised address "to clean up the mess".
The Pacific archipelago, which has a population of around a quarter of a million people, is still recovering from a deadly category five storm in March that destroyed homes and crops and contaminated water supplies.