Additional across-the-board reductions of 3 percent were approved for 2014, The Jerusalem Post reported.
The budget was approved by a vote of 21-1 after negotiations between cabinet members and Prime Minister Binyamin Netanyahu that stretched through the night.
The Defense and Welfare and Social Services ministries were not affected by the cuts, although Netanyahu did intervene during the cabinet discussions to reduce the defense budget from $1.1 billion to $823 million.
Finance Minister Yair Lapid said reserve funds would make up the difference.
The cabinet also decided to keep an exemption for tourists that excuses them from paying an 18 percent value-added tax on items they buy in Israel.
Also pulled from the budget were proposals to trim research and development and school systems for children of the fervently Orthodox.
The budget now goes to the Knesset, where lawmakers of the opposition parties have said they will make drastic changes.
Opposition leader Shelly Yacimovich said the budget was "a betrayal of the voters," while Shas leader Arye Deri called the document " a budget of cowards who don't want to make decisions and are fleeing from leadership at a difficult time."