All the ministers from the far-right Freedom Party, the junior member of Austria's coalition government, have stepped down, news agency APA reported on Monday.
The Freedom Party had said earlier on Monday it would pull its ministers out of the government if Interior Minister Herbert Kickl were forced out in the wake of a video sting that felled its leader at the weekend.
Chancellor Sebastian Kurz proposed on Monday evening that Kickl be sacked.
Kickl's imminent removal follows the resignation on Saturday of Freedom Party leader Heinz-Christian Strache, who was also Austria's vice chancellor, after two German newspapers published a damning video showing him pandering to a woman claiming to be a Russian tycoon's niece at a boozy gathering in Ibiza two years ago.
In the video, Strache and party colleague Johann Gudenus are heard telling the woman that she can expect lucrative construction contracts if she buys an Austrian newspaper and supports the Freedom Party. Gudenus has quit as leader of the party's parliamentary group and is leaving the party.
Kurz noted that at the time the video was shot, Kickl was general-secretary of the Freedom Party and therefore responsible for its financial conduct.
Kurz added that in conversations with Kickl and other Freedom Party officials following the video's release, he "didn't really have the feeling (they had) an awareness of the dimension of the whole issue".
Setback for populists as European elections loom
Strache's resignation represents a setback for populist and nationalist forces as Europe heads into the final days of campaigning for the European Parliament elections, which run from Thursday through Sunday.
Kurz has endorsed a hard line on migration and public finances, and chose to ally with the Freedom Party after winning the 2017 election.
The 32-year-old, who is personally popular, said Saturday that "enough is enough" - a reference to a string of smaller scandals involving the Freedom Party that had plagued his government. In recent months, those have included a poem in a party newsletter comparing migrants to rats and questions over links to extreme-right groups.
Kickl, a longtime campaign mastermind of the Freedom Party, has drawn criticism over matters including a raid last year on Austria's BVT spy agency, which opposition parties claimed was an attempt by the new government to purge domestic political enemies.
His party said he had done nothing wrong.
'Nothing to do with Russia'
The Russian government, meanwhile, said it couldn't comment on the video "because it has nothing to do with the Russian Federation, its president or the government".
President Vladimir Putin's spokesman, Dmitry Peskov, said of the woman in the Strache video that set off the crisis: "We don't know who that woman is and whether she's Russian or not."