Sri Lanka is returning to a state of war
It said escalating violence had made the Norwegian-brokered truce redundant. The accord came into effect in February 2002 ahead of inconclusive peace talks.
Since mid-2006 troops and rebels have fought regular clashes, despite the deal still technically being in place.
There was no immediate response from the Tigers, who want independence for Tamils in Sri Lanka's north and east.
'Moribund'
"The Cease Fire Agreement [CFA] had been violated nearly 10,000 times by the Tamil Tigers, so we should annul this agreement," the cabinet's spokesman on security matters, Keheliya Rambukwella, told the BBC.
"National security is threatened at every corner," he said.
There was great optimism when the CFA was signed
Mr Rambukwella said that the "foremost thing in the country is to uphold national security" which was why the government had taken the decision.
He said that withdrawal from the CFA was not a declaration of war against the Tamil Tigers, and would be done in a way that does not breach the conditions of the agreement.
Under the February 2002 ceasefire brokered by Norway, both the Sri Lankan government and the Tamil Tigers have the option to withdraw from the CFA after giving two weeks' written notice to the Norwegian foreign minister.
Last week, Sri Lankan Defence Secretary Gotabhaya Rajapaksa said in public that the truce between the two sides was "moribund" and that the CFA was a "joke".
Correspondents say that even though both sides acknowledged this to be true, neither wanted to be seen as the first formally to withdraw from the ceasefire.
Mr Rambukwella argued that the government had already taken steps to address the grievances of the minority Tamil community and was holding talks with moderate Tamil parties.
So far there has been no word from the Tamil Tigers on the government's announcement, but some analysts have warned that the development will only serve to polarise the two sides.
About 5,000 people have been killed since early 2006, taking the total number of dead since the war erupted in 1983 to around 70,000.
Bus bombing
Earlier on Wednesday, a bomb targeting a bus in the capital, Colombo, killed at least four people and injured another 20, police and military officials said.
The blast took place as the military bus was passing a busy junction in a district that houses key military installations, reports said.
A hospital official told Reuters that two of those killed were soldiers.
Military officials said they suspected the Tamil Tigers. The rebels denied involvement, Reuters reported.
The government of Sri Lanka says it is withdrawing from a cease-fire agreement with Tamil rebels because, in the opinion of the government, the pact has become meaningless. Anjana Pasricha reports from New Delhi the withdrawal is largely symbolic because the Norwegian-brokered truce collapsed two years ago. 

There have be many clashes between the government and the rebels  since mid-2006. This happened despite the fact that they were still in a cease-fire.

The government's decision to end a 2002 truce agreement with Tamil rebels came as a vast majority of people believed that the pact existed only in name.

The announcement came late Wednesday after a meeting among senior Cabinet ministers. 

Sri Lanka's foreign secretary, Palitha Kohona, says the government is "reluctantly" ending the truce because it did not achieve what it was supposed to - a peace settlement with the rebels, known as the LTTE.

"From the beginning it was observed only in the breach by the LTTE. In the first couple of years, it used the cease-fire agreement to regroup, rearm, and then in 2005 it launched massive attacks on government forces," said Kohona. "In a real practical sense, this agreement served very little purpose."

Both the rebels and the government routinely blame each other for the resumption of hostilities. The fighting began soon after a hard-line government took over in Colombo, and the rebels accused the government of a lack of seriousness in pursuing peace talks. The Tamil rebels want an autonomous homeland for Sri Lanka's minority Tamil community. 

In the past two years, near-daily clashes on the battlefield, assassinations and bombings have killed about 5,000 people.

Political analysts say ending the truce will polarize the two sides even further. They say the government , which has scored some military successes against the rebels, wants to defeat them on the battlefield. 

Sri Lankan foreign Secretary Kohona says ending the country's ethnic conflict should not be linked to negotiations with the rebels. 

"A political settlement is not necessarily going to be with the Tamil Tigers," added Kohona. It will take into account the concerns of the Tamil people of Sri Lanka and the other minorities of Sri Lanka." 

Norwegian mediators have expressed concern about the government's decision to end the truce, calling it a "serious step." Norway's foreign ministry Web site says there have been increasingly frequent and brutal attacks by both parties, and there is concern that violence and hostilities will escalate further. 

The truce had received wide international support, and raised hopes of ending the country's quarter-century long ethnic conflict. But many think that the formal ending of the cease-fire means the civil war could drag on for years.