Abbas explained the decision noting that its Hamas rivals would not allow it to operate in Gaza, where Hamas is in control.
The cabinet was formed in last June and aimed at ending a major rift between Fatah, which governs the West Bank, and Hamas.
The two sides had governed separately as a technocratic government since the Islamist group Hamas won elections in 2006 and ousted Fatah from the Gaza Strip in 2007.
However deep divisions remained resulting in political paralysis.