Yemen President Abdrabbu Mansour al-Hadi has dismissed his government and said he would appoint a new prime minister and establish a unity administration.
He has also pledged to review planned cuts to fuel subsidies. Al-Hadi previously announced a series of economic reforms in early July.
The move is an effort by the president to appease Yemens Houthi Shia protesters, who have been angered by plans to cut subsides.
Yet, Houthi supporters have rejected the presidents initiative and continue to hold protests in the capital Sanaa, which have already lasted for weeks.
The Houthis have regularly held protests over the past decade, demanding more control over the Saada Province.