The plan, which still requires the approval of the upper house Senate, seeks to resolve Spain's worst political crisis in four decades but risks an angry reaction from independence supporters, who plan street protests later in the day.
In outlining the cabinet's decision, Prime Minister Mariano Rajoy said the Catalan economy, which accounts for a fifth of the national economy, was already in worrying shape as a result of the regional's government push for independence.
"We will ask the Senate, with the aim of protecting the general interest of the nation, to authorise the government... to sack the Catalan president and his government," Rajoy told a news conference.
It is the first time since Spain's return to democracy in the late 1970s that the central government has invoked the constitutional right to take control of a region and rule it directly from Madrid.
Direct rule will include full control of the region's police, finances and public media. The powers of the regional parliament will also be curbed.
Rajoy said his intention was to not use those special powers for more than six months and he would call a regional election as soon as the situation was back to "normal."
"Our objective is to restore the law and a normal cohabitation among citizens, which has deteriorated a lot, continue with the economic recovery, which is under threat today in Catalonia, and celebrate elections in a situation of normality," Rajoy said.
The measures must now be approved by Spain's upper house, the Senate, where a vote is scheduled for October 27.
"The rulers of Catalonia have respected neither the law on which is based our democracy nor the general interest," the government said in a memorandun obtained by Reuters. "This situation is unsustainable."
The independence push has brought on Spain's worst political crisis since a failed military coup in 1981 several years after the end of the Franco dictatorship. It has met with strong opposition across the rest of Spain, divided Catalonia itself, and raised the prospect of prolonged street protests
It has also led Madrid to cut economic growth forecasts for the euro zone's fourth-largest economy and prompted hundreds of firms to move their headquarters from Catalonia. Rajoy on Saturday urged firms to stay in the region.
The main opposition Socialists said on Friday they would back special measures and had agreed on the holding of regional elections in January. Rajoy also received the backing of the head of state, King Felipe, on Friday, who said at a public ceremony that "Catalonia is and will remain an essential part" of Spain.
Pro-independence groups have mustered more than one million people onto the streets in protest at Madrid's refusal to negotiate a solution. Heavy-handed police tactics to shut down a the Oct. 1 independence referendum drew criticism from human rights groups.
Regional authorities said about 90 percent of those who cast ballots voted for independence. But only 43 percent of voters participated and opponents of secession mostly stayed home.
Puigdemont stopped short of making a unilateral declaration of independence following the referendum, but on Thursday he threatened to do so unless the government agreed to a dialogue. He accused Madrid of "repression".
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
Get the latest election news, live updates and election schedule for Lok Sabha Elections 2019 on ndtv.com/elections. Like us on Facebook or follow us on Twitter and Instagram for updates from each of the 543 parliamentary seats for the 2019 Indian general elections.