Albert, 47, is the only son of Rainier and his late wife, U.S. actress Grace Kelly.
His 81-year-old father has been in intensive care in "extremely guarded" condition for the past week. He has a long history of heart, lung and kidney problems. He most recently entered a Monaco hospital with a chest infection March 7.
A statement from the royal palace said the Council of the Crown had decided it was too difficult for Rainier to "exercise his high functions.
"From now, the regency is assured by His Serene Highness Prince Albert."
Rainier came to the throne in 1949 and is Europe's longest reigning monarch.
Doctors said they would release an update on his health Friday.
2014: The Year in Music [PHOTOS]