"I am accepting [the government's resignation]," Niinisto said during a brief conversation with Sipila, as aired by the MTV3 broadcaster.
The government's resignation is taking place against the backdrop of unsuccessful attempts to reform the country's health care system and social services.
Niinisto has asked Sipila and his cabinet to continue on and operate as a transitional government, according to Huvudstadsbladet newspaper.
The news comes as Finland prepares to hold parliamentary elections on 14 April to determine the composition of the nation's 200-seat legislature, the Eduskunta assembly.
Finland held its most recent parliamentary elections in the spring of 2015. They resulted in the formation of a three-party government coalition between the 'Finnish Centre', the National Coalition Party and the 'True Finns'. In 2017, as a result of an internal party split, the True Finns went into opposition, and the Blue Future, which had separated from them, retained cabinet positions.