The move also followed a call by the United States to revive stalled peace talks between the government and the Tamil Tigers.
"The cabinet of ministers today decided to pull out of the ceasefire," Liyanage said.
"The legal process will now kick in."
Under the February 2002 ceasefire arranged by peace broker Norway, both the Sri Lankan government and the Tamil Tigers were given the option to pull out after giving Oslo two weeks' notice.
Liyanage said Prime Minister Ratnasiri Wickremanayake proposed that the government should formally quit the truce because it was holding only on paper since an escalation of fighting in December 2005.
The government set up a committee looking into the legal implications of the latest decision to withdraw from the ceasefire, the centrepiece of Norway's attempts to broker an end to the island's drawn-out Tamil separatist conflict.
Last week, the president's defence secretary, his brother Gotabhaya Rajapakse, publicly declared there was no point in obs