But the health reform plan has had a rocky road, running several times into constitutional obstacles, and the government has also come under fire over a scandal involving neglect at nursing homes. Earlier on Friday, Finland's broadcaster Yle announced that the government dropped its plans for major healthcare and social services reform, citing anonymous sources.
Finnish President Sauli Niinisto approved the resignation of the government at a meeting with the country's prime minister, Juha Sipila, on Friday morning; the meeting was broadcast on the television channel MTV3.
The populist True Finns, who were in government before splitting from their former ministers who founded a new party, have staged a recovery in recent months to 12 per cent, still below the 18 per cent they recorded in 2015.
Claims that the reforms would bring three billion euros ($3.3 billion) of savings to the country's welfare bill have also been repeatedly called into question.
Sipila has since 2015 headed a coalition made up of his Centre Party, the conservative National Coalition, and Blue Reform, a moderate faction spun off from the far-right. "I take responsibility for the failure".
President Sauli Niinisto has asked Sipila to remain in office as a caretaker Prime minister until an April 14 parliamentary election.
The current cabinet will retain their jobs until a new government is formed after the election, but will only work to finish off business that is already in progress. He added that resigning had been "his personal decision".
The head of the opposition Social Democrats, Antti Rinne, told reporters outside parliament the government had turned itself into "a political sitting duck".
The Centre Party chair said that his coalition partners understood his reasons for proposing the government's resignation.
Sipila had previously said he would resign with his government if the reform failed.