Ukrainian President Petro Poroshenko has asked Prime Minister Arseniy Yatsenyuk to resign, saying he has lost the support of the governing coalition.
But Mr Poroshenko said that there would not be a snap election.
Mr Yatsenyuk's government has been criticised over the slow pace of reforms and faces allegations of corruption.
Western governments have expressed concern over the resignation of reform-minded figures from the government.
Demonstrators have gathered outside parliament in Kiev to protest against government policies.
A former speaker of parliament and foreign minister, Mr Yatsenyuk was one of the main opposition leaders during the massive protests that removed former pro-Russia President Viktor Yanukovych in 2014.
He came to power promising to tackle corruption and implement economic reforms, but has become the focus of accusations of corruption, even though no concrete evidence has emerged.
In a statement, Mr Poroshenko said it was "obvious" that there was demand for a "complete reset of the cabinet".
"The cabinet has lost the coalition's trust," he said.
"To restore this trust, therapy is not enough. One should resort to surgical means," the president added, saying a new cabinet could be formed by the existing parliamentary coalition.
The president's intervention comes as opinion polls suggest growing public discontent with Mr Yatsenyuk's government.
An eventual resignation still needs to be approved by parliament and observers say he has no obvious successor.
Economy Minister Aivaras Abromavicius, seen as a key reformer by the West, resigned earlier this month, claiming that huge quantities of money were being diverted from the government.
The International Monetary Fund (IMF) has threatened to withhold aid money to Ukraine if it does not carry out reforms.
'Reforms are only way forward'
Shortly after the president's statement, Mr Yatsenyuk addressed parliament, but was not explicit on whether he would resign, saying he would accept whatever decision parliament made.
In a report to lawmakers that reviewed the government's performance in 2015 and its agenda for this year, he said his cabinet had done all it could under difficult circumstances.
"We have built the foundations for a new country. Let's build a new Ukraine: do not stop. Reforms are the only way forward," he said.
Parliament is now expected to vote on Mr Yatsenyuk's performance.
Mr Poroshenko's party will criticise the prime minister as being as "unsatisfactory", its leader Yuriy Lutsenko told parliament. That would raise the possibility of the no-confidence vote.
Mr Poroshenko also urged the country's controversial prosecutor general Viktor Shokin to step down. Unconfirmed reports in Ukrainian media suggest he has tendered his resignation.