The 17-5 vote on Sunday marks the first time an Israeli government has given the green light for the removal of settlements from occupied land the Palestinians want for a state of their own.
The decision in effect gives the 8000 settlers slated for evacuation the five months notice Israel's attorney-general said was required under law before they could be ordered to leave.
Earlier, Aljazeera correspondent Walid al-Umari reported that Palestinians were concerned the withdrawal would include the re-routing of the illegal separation wall built on land occupied by Israel.
Palestinians believe the separation wall should be set up - if necessary - along the Green Line and not inside their lands, he said.
The route change would keep some settlements under Israeli authority on Palestinian lands, particularly between Bethlehem and Hebron, al-Umari added.
Settlers have vowed to resist the
removal of the settlements
Sharon's plan to remove settlers has been called a possible step towards peace by both Israelis and Palestinians.However, even after Sunday's cabinet approval, opponents could use a pending budget vote to bring down the government.
Sharon is still trying to rally allies to back the budget and if he fails by the end of March, new elections must be called.
Further cabinet votes would also be needed to approve specific settlement evacuations nearer the time.
Israeli media said about 6000 unarmed troops and police would be involved in removing each settlement.
De facto truce
Jewish settler leaders have urged non-violent resistance, but security services have said there could still be bloody confrontations. Concerns that withdrawals might be hampered by Palestinian attacks have receded somewhat since Palestinian Authority President Mahmud Abbas agreed to a ceasefire with Sharon.
Palestinian resistance movements have not formalised the agreement, but are maintaining a de facto truce.
Israel has been accused of violating the ceasefire by killing a 15-year-old boy in Hebron and two other alleged activists of Palestinian resistance movements.