Arseniy Yatsenyuk said the decision to split from Prime Minister Yulia Tymoshenko's bloc was made on Wednesday. Both sides have 10 days to resolve their differences before the split comes into effect.
If no new coalition is formed within 30 days, the president could dissolve parliament and call early elections.
The latest crisis started when lawmakers from the pro-Russian opposition, the Party of Regions and the Communist Party, backed by the Yulia Tymoshenko Bloc, voted to reduce the president's powers amid a growing government power struggle.
Relations between President Viktor Yushchenko and Tymoshenko have become strained recently after the prime minister failed to condemn Russia's actions in the conflict in South Ossetia, and back the president in his support for Georgia.
The premier, who was accused by the president of "treason and political corruption," was widely expected to run against Yushchenko at the next presidential election, but on Wednesday she said in a televised address to the nation that she was prepared to back out of the presidential elections "to support a single [democratic] candidate."
According to Ukrainian popularity polls, Tymoshenko currently enjoys at least 25% of voter support. Leader of the oppositional Party of Regions Viktor Yanukovych is trailing with 20%, while President Viktor Yushchenko's popularity rating has plummeted to a mere 6%.
Yanukovych, Ukraine's pro-Russian former prime minister, who has backed Russia's recognition of Georgia's rebel regions, has not ruled out a possible coalition with the Yulia Tymoshenko Bloc.
