The social and healthcare reform, which several governments have tried to implement, will collapse today, and will be moved to the next government.
The prime minister had earlier vowed to resign with his government if the reform failed.
Finnish Prime Minister Juha Sipila officially Friday offered his government's resignation to the country's president after it failed to put through a social and health care reform package, saying he was "hugely disappointed", the president's office announced.
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. "I take responsibility for the failure".
Finland is due to hold a parliamentary election on Sunday, April 14.
President Sauli Niinisto has asked the government to continue as a transition Cabinet until a new administration is appointed.
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Sipila resigned "because the healthcare reform can not be accomplished during this government term", Antti Kaikkonen, the head of Sipila's Centre Party's parliamentary group, wrote on Twitter.
"The social welfare and healthcare reform was one of our government's most important objectives", Sipila said at a press conference.
The planned health care reform was meant to tackle an aging population and reduce public spending by 3 billion euros ($3.4 billions) by 2029. The changes were crucial to the three-party governing coalition's plan to balance public finances.
Member of parliament Kalle Jokinen, from the conservative National Coalition Party - a partner in Sipila's government - said it would have been better to see a working government in place up until the election.
Last year, the latter broke up into two parties after internal divisions over tighter immigration policies.