Charles Konan Banny, the interim prime minister, offered the resignation of his cabinet to Laurent Gbagbo, the President, during an emergency meeting held to solve the crisis on Webnesday.
"The situation is very serious. That is why I am presenting you with the government's resignation," Banny said.
The emergency meeting followed street protests in Abidjan during which roads were blocked with branches and boulders, preventing medical staff from getting to hospital where dozens lined up for treatment, some wearing paper masks.
The government appealed on TV to the protesters to let medical personnel through and police later fired tear-gas to try to disperse them.
Gbagbo, the president, said that he accepted the government's resignation but suggested that its members should continue their work and prepare to form a new administration on Thursday.
"I accept the resignation of your government but I ask you to manage current business and ask for your presence at the presidential palace tomorrow to form a new government," Gbagbo told Banny.
"At whatever level it may be ... those who are responsible must be hunted down and sanctioned. We have to know the nature of the damage. We cannot sit back and cross our arms."
Hundreds of residents complained of nausea, sore chests, vomiting and diarrhoea after waste containing hydrogen sulphide was dumped in at least eight open-air sites around the densely populated city.
Authorities said the waste was unloaded from a Panamanian-registered ship on August 19.
Residents have suffered nausea,
vomiting and diarrhoea
A government spokesman said that tests have shown that drinking water has not been contaminated but that all precautions will be taken to protect the population, including relocating those affected.
The French foreign ministry said a team from its office of geological and mineral research was being sent to help evaluate the environmental risks and that a second team would be sent by the weekend to help limit its impact.
Ivory Coast is a former French colony. French peacekeepers have been based there since a civil war ended in 2003.
Three people arrested
The Ivorian state prosecutor said three people linked to the firm responsible for unloading the ship had been arrested.
Prime Marine Management, the Greek company that owns the Probo Koala, the ship that unloaded the waste, said the ship, manned by a Russian crew, was not responsible for the poisoning.
Iorgos Kouleris, the company's director of operations, said that the company was "sorry for the situation".
He said that unloading the waste was legal and that an Ivorian company had been put in charge of the waste after it was discharged.
The government's resignation came a day after rival factions in the West African country failed to reach agreement on key steps towards holding elections by the end of October.
Ivory Coast has been split between the rebel-held north and government-controlled south since a brief civil war in 2002-2003.