The cabinet, which met at Prime Minister Manmohan Singh's residence, also decided to place the Andhra Pradesh assembly in suspended animation.
N Kiran Kumar Reddy Feb 19 had resigned as chief minister and also quit the Congress to protest parliament passing the Telangana bill.
Governor ESL Narasimhan had accepted Kiran Reddy's resignation the same day and asked him to continue as caretaker chief minister till alternate arrangements were made.
After consultations with Congress leaders from both Telangana and Seemandhra for nearly a week, the Congress party took the decision to impose President's rule as recommended by the governor.
The decision was taken after Union Home Minister Sushilkumar Shinde and Congress general secretary Digvijaya Singh called on party president and UPA chairperson Sonia Gandhi Thursday.
The last and the only time President's rule was imposed in Andhra Pradesh was in 1973 when P.V. Narasimha Rao of Congress party was the chief minister. The situation created by the violent 'Jai Andhra' agitation for a separate Andhra state forced the centre to invoke Article 356 of the Constitution. The state was under President's rule from Jan 11, 1973 to Dec 10, 1973.
Though a section of party leaders from both Telangana and Seemandhra were opposed to the idea of President's rule, the party leadership had to go for it as it realized that a new government will have no time to take any decision in view of the election code of conduct.
The Election Commission is likely to announce schedule for general elections early next week. Simultaneous assembly elections are also due in Andhra Pradesh but there is no clarity if the polls will be held in undivided state or in two separate states.
Andhra Pradesh Reorganisation Bill, 2013, passed by the parliament last week, is awaiting President's Pranab Mukherjee's assent. This will be followed by a gazette notification, giving the appointed date or formation date of Telangana as 29th state of the country.
Union minister Jairam Ramesh has hinted that there could be a gap of three months between the notification date and the appointed date.