The government will continue to carry out its duties until a new one is formed, it said in a statement issued after a weekly cabinet meeting.
There was no immediate comment from Abbas, but his Fatah faction, at a meeting he chaired two days ago, recommended that the government be replaced. A Hamas official condemned the move as an attempt to marginalize and exclude the group from Palestinian politics.
Hamdallah, a little-known academic, headed the national unity government formed in 2014 and led the West Bank-based Fatah's reconciliation efforts with Hamas, which came to power in Gaza in 2007.
The two groups signed a reconciliation deal two years ago which set in motion a plan for Abbas's Palestinian Authority to resume governing in Gaza and take up control of the coastal enclave's crossing points into Egypt and Israel.
But disputes over power-sharing and disagreements over policy toward Israel have hampered the deal's implementation.
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