The decree, by Sheikh Sabah al-Ahmad al-Sabah, ordered the dissolution of the house a few days after reformist legislators submitted a request to question Sheikh Nasser al-Mohammad al-Sabah, the prime minister, about the bill, which is aimed at curbing voting irregularities.
The bill sought to reduce the number of electoral constituencies to 10 from 25, but parliamentarians said it needed to go further and reduce the number of constituencies to five.
The elections will be on June 29.
The emir said he decided to dissolve parliament "to maintain the security of our country and the safety of its people".
He said that the period before the election would give all sides time to "think what is in the interest of our country".
Aljazeera's correspondent in Kuwait said the emir had ordered the dissolution of parliament after deciding there was no confidence between both sides in the parliament.
The elections will be held with the current system of 25 constituencies, the decree said.
Sheikh Sabah al-Ahmad al-Sabah
set elections for June 29
The disputed bill was introduced to parliament on Monday, but the session was suspended after opposition MPs walked out.
Reformists' supporters rallied outside the parliament on Tuesday, chanting slogans demanding that the number of electoral districts should be cut to five.