The move -- which Likud says will enable it to campaign as an alternative government in March elections -- was expected and had been planned for last week, but was postponed after Prime Minister Ariel Sharon suffered a massive brain haemorrhage.
Party leaders had called on activists to temper their campaigning out of respect while Mr Sharon was fighting for his life.
But with doctors pronouncing the premier out of immediate danger, the gloves swiftly came off.
Likud’s hawkish leader Benjamin Netanyahu launched a vitriolic attack on Kadima, the new party founded by Ariel Sharon, accusing it of making concessions that undermined Israel's longstanding policy of retaining all of Jerusalem as its eternal undivided capital.
"Kadima is taking measures that mean that Jerusalem is going to be divided," Mr Netanyahu said in reference to the government's plans to allow residents of annexed Arab East Jerusalem to vote in Palestinian elections on January 25.
That decision, which had already been announced in principle by Defence Minister Shaul Mofaz earlier this week, had been due to be sealed at a cabinet meeting on Sunday in which the four Likud ministers will now not take part.
Labor, which could see voters wooed away by Mr Sharon's new centrist party, meanwhile reversed previous instructions to its activists to avoid strong campaign rhetoric.
"The election is starting right now. This is the first phase of the election," Labor leader Amir Peretz told a news conference at the party's election headquarters just outside Tel Aviv.
Mr Sharon's opponents had been particularly incensed by suggestions from his own supporters that, even in his still incapacitated condition, he might yet be able to lead his new Kadima party into the March 28 poll.
"It will be wonderful if we really reach a situation in which he can function, communicate and be involved, and of course the minimum that we will want to do is to put him in his natural place," said Kadima's campaign manager Tzahi Hanegbi.
Politicians from both Likud and Labor accused Kadima of abusing the prime minister's name, acutely sensitive that Mr Sharon's plight has maximised public support for his fledgling centrist movement.
"As someone who knows and values Sharon, it pains me that there are various elements around him who are trying to make a political fortune on the back of his illness," said Likud MP Moshe Kahlon.
Labor secretary general Eitan Cabel said it was "cynical" to put Mr Sharon in the number one spot on Kadima. "If they don't have Sharon, they don't have anything," he said.
Deep divisions
The three main parties are deeply divided over the future of the Palestinian territories and the way forward for the Israeli economy, their divisions palpable ahead of internal elections to choose their candidates.
Likud holds its primaries on Thursday. Labor is due to hold a similar vote next Tuesday, after which its campaign will begin in earnest.
With the departure of Mr Sharon and his supporters, Likud has already moved sharply to the right and party officials expressed concern that they could end up with an exclusively hardline list of candidates.
"If the Likud does not tone down its political views, we will experience a serious problem at the ballots -- the public is looking for the way to the centre, not for a radical way,"
central committee member Shlomo Madmon said.
The Likud cabinet resignations will come into effect 48 hours after they are presented to Prime Minister Olmert.