Monti came to his decision after talking with President Giorgio Napolitano at the Quirinal Palace, Agenzia Giornalistica Italia reported.
"The declarations made yesterday in Parliament by PDL Secretary Angelino Alfano clearly represent a no-confidence vote for the government and its policies," the Italian news agency quoted Monti as saying.
A statement issued by the president stated Monti said he "reckons the government will not be able to finish its term" and he "is ready to resign."
AGI said Monte cautioned Italian lawmakers that "not undertaking the responsibility of bringing about a provisional budget" would "worsen the consequences of a government crisis on a European level, too ... ."
The BBC reported Monti, who had been minister of economy and finance before being named prime minister in November 2011 following the resignation of Berlusconi, said he will try to marshal through a budget and financial stability law before leaving office.
The British network noted under Italian law, elections must be held within 70 days of the government resigning. Elections had been expected by April before Monti's announcement.
Belusconi, who heads the PDL party, has announced he will run for prime minister again, despite facing ongoing legal problems.
Berlusconi, 76, is appealing his conviction for tax fraud in October. He also is on trial on charges he paid for sex with an underage prostitute. He denies the allegations.
Berlusconi, a businessman with vast holdings, has served as Italy's prime minister three separate times.