The bank did not say which currencies the dinar had been linked to.
National interest
Oman and Bahrain, the two smallest Gulf economies, as well as Qatar and Saudi Arabia, the largest Arab economy, said they planned to stand by their dollar links.
There has been no comment from the central bank of the United Arab Emirates, whose currency could take centre stage as prospects for a single currency in the Gulf evaporate.
Kuwait was still committed to monetary union, the central bank governor said in a statement, after changing the dinar's rate to $0.228806, an appreciation of about 0.37 per cent.
Sheikh Salem Abdul-Aziz Al Sabah, said in comments reported by state news agency KUNA: "The massive decline in the dollar's exchange rate against main currencies ... has contributed to the increase in local inflation rates and this step is part of the central bank's efforts to curb inflationary pressure."
The actual decision to abandon the dollar link adopted in 2003 to prepare for monetary union caught markets and fellow central bankers unawares.
Al Sabah said his country was only acting in the "national interest" to contain inflation.
"Until the completion of all the requirements to achieve the currency union and the launch of the Gulf currency, the Central Bank of Kuwait will continue to adopt the basket system."