This partly meets popular demand for election reform in the Gulf Arab state before parliamentary polls next year.
Cabinet, however, did not adopt proposals to amend the constitution to add 10 more seats to the 50-member parliament.
Many parliamentarians say that lowering the number of constituencies in Kuwait, which has only about a million people eligible to vote, is essential to guard against election fraud such as vote-buying.
Allegations of vote buying are not unusual in Kuwait, an ally of the US, where candidates hold lavish banquets to sway would-be voters.
The cabinet, in a statement late on Tuesday night, said: "The Council of Ministers has decided to OK a draft law to distribute the electoral constituencies over 10 districts."
Parliament is due to discuss the draft law on May 15, and several deputies have said they want the districts to be reduced to five, not 10.
Al-Rasheed quit in protest at
attempts to amend constitution
The cabinet also said that Sheikh Sabah al-Ahmad al-Sabah, the emir, had accepted the resignation of Anas al-Rasheed, the information minister, who quit his job on Tuesday in protest at attempts to amend the constitution to increase the number of MPs.
Analysts say such an amendment could dilute the independence of the influential assembly.
Kuwait is the first Gulf Arab state with an elected parliament that has political clout.
The assembly, which includes more than a dozen Islamist and conservative MPs, often clashes with the government and questions members of cabinet.
Last year, the house forced three cabinet members to resign.
This year parliament also removed from office the ailing hereditary ruler, breaking with a power-sharing tradition and setting a precedent in the conservative region.