Prime Minister Mark Rutte has announced the resignation of his government, accepting responsibility for years of mismanagement of childcare subsidies which wrongfully drove thousands of families to financial ruin.
Rutte said he had handed his resignation to King Willem-Alexander.
The cabinet would remain in place in a caretaker capacity to manage the coronavirus crisis for now, with an election already due on March 17.
The resignation follows a parliamentary inquiry last month that concluded that bureaucrats at the tax service had wrongly accused families of fraud.
The inquiry report said about 10,000 families had been wrongfully forced to repay tens of thousands of euros of subsidies, in some cases leading to unemployment, bankruptcies and divorces.
It described such mismanagement over a decade as an "unprecedented injustice".
Many of the families were targeted based on their ethnic origin or dual citizenship, the tax office said last year.
Orlando Kadir, a lawyer representing about 600 families, told Dutch radio that people had been targeted "as a result of ethnic profiling by bureaucrats who picked out their foreign-looking names".
Even though public support for the government's COVID-19 measures has dipped sharply in recent weeks during a tough lockdown, Rutte's People's Party for Freedom and Democracy (VVD) is still riding high in public opinion polls.
His VVD is projected to take just under 30 per cent of the vote in March 17 parliamentary elections, more than twice that expected to go to the second-placed PVV, the anti-Islam party of Geert Wilders.
Australian Associated Press