Canada's three opposition parties, which control a majority in parliament, voted against Martin's government on Monday, claiming his Liberal Party no longer has the moral authority to lead the nation.
The loss means an election for all 308 seats in the lower House of Commons, likely on 23 January. Martin and his cabinet would continue to govern until then.
Monday's vote follows a flurry of spending announcements in Ottawa last week, with the government trying to advance its agenda before its demise.
Opposition leaders last week called for the no-confidence vote after Martin rejected their demands to dissolve parliament in January and hold early elections in February.
Martin is expected to dissolve the House of Commons on Tuesday and set a firm date for the elections.
"The decision of the future of our government will be made by Canadians. They will judge us"
Canadian Prime Minister
Under Canadian law, elections must be held on a Monday unless it falls on a holiday and the campaign period is sharply restricted.
"The vote in the House of Commons did not go our way," Martin said. "But the decision of the future of our government will be made by Canadians. They will judge us."
The Conservative Party leader Stephen Harper joined with the New Democratic and Bloc Quebecois parties to bring down the government, prompting the first Christmas and winter campaign in mostly Christian Canada in 26 years.
Recent polls have given the Liberals a slight lead over the Conservatives, with the New Democrats in third place.