Explaining the decision, Prime Minister Zhelyazkov said the government "has listened to the voice of the people" and wishes to meet society's expectations.
Zhelyazkov announced the decision in a televised address just minutes before parliament was due to vote on a no-confidence motion.
For several weeks, small-scale protests had been taking place across Bulgaria. On Wednesday, tens of thousands of people continued to take to the streets to protest economic policies, particularly the 2026 budget draft that the government withdrew.