The dissolution of the Cabinet, which included a mass resignation by ministers, is a concession to opposition leaders whose support the government seeks to pass broad economic reforms.
Speaking at the last session of the Cabinet on Wednesday, Gilani said a new Cabinet would be sworn in within the next 24 hours.
He said the government was moving toward implementing the constitution.
The decision to dissolve the Cabinet was announced on Friday by People's Party official Jahangir Badar.
The decision follows criticism that the Cabinet, which had more than 80 members, was costing too much to a country facing a financial crunch.
The Associated Press quoted the spokeswoman of the Pakistan People's Party as saying, "The prime minister has dissolved the Cabinet after receiving resignations from the ministers, and it has been done to further reduce the size of the Cabinet." She added that the move aims at "fiscal austerity." Pakistan's economy relies heavily on loans from the International Monetary Fund and the government has struggled to raise revenues, in part because many residents avoid paying taxes. Chronic power shortages have hampered economic growth and floods last year caused massive damage to infrastructure.
But ruling party's efforts to impose new economic policies have been rebuffed by the opposition and even some allies.
Analysts say shrinking the Cabinet — along with other concessions — could help the People's Party appease other groups and ultimately gain their support for economic reforms.
Key ministries such as foreign and interior are likely to stay intact in the new Cabinet, though positions such as minister for postal services might be cut.
