Emir Sheikh Sabah al-Ahmed al-Sabah announced the move in a bid to end a row over an election reform bill that opposition MPs complained did not do enough to prevent vote fraud in the oil-rich Gulf state.
"I had to take a difficult decision that I had wanted to avoid, but I concluded that it was my duty to dissolve parliament to safeguard the security of our nation," the emir said in a televised address to the nation.
He called for new elections to take place on June 29.
Sheikh Sabah, 76, took power in January only after a row over succession in Kuwait following the death of the previous emir.
"Pursuant to decree 146 for the year 2006 parliament will be dissolved," read the decree carried by the official KUNA news agency. "Voters are invited to elect new members of parliament on Thursday June 29, 2006."
The new elections will be held in accordance with the current electorate system of 25 constituencies, the decree said.
"We all witnessed the charged and tension-fuelled situation that has distracted us from the rest of our priorities and practices that have deviated from healthy parliamentary norms," the emir said.
"This was starting to threaten the security and stability of our nation," he said, adding that the tense atmosphere was impeding efforts to reach a "rational solution".
The dissolution of parliament came after the cabinet, headed by Prime Minister Sheikh Nasser Mohammad al-Ahmad al-Sabah, a nephew of the emir, had said it was no longer able to deal with parliament because of the election law row.
The crisis reached a peak last Monday when pro-government MPs voted to refer a government proposed electoral reform bill reducing the number of constituencies to 10 from 25 to the constitutional court for a ruling.
The move prompted a walkout by 29 opposition MPs who went on to form a new bloc called the Alliance for Change which on Wednesday filed a request to question the prime minister for the first time in Kuwaiti history.
Although the government had backed down and called a special session for tomorrow to reopen debate on the reform bill, the opposition insisted it would only discuss a more radical reform cutting the number of constituencies to five.
"There is no room for negotiations. Either the government comes up with a new bill of five districts or the questioning of the prime minister will go ahead," opposition MP Ahmad al-Mulaifi said in parliament.
Even pro-government MPs threatened at a public rally yesterday to boycott the planned new session.
Pro-government MPs said they were prepared to back a reduction
in the number of constituencies to counter allegations of vote-buying, provided voters are distributed fairly between them.
Since its inception in 1962, the Kuwaiti parliament has been dissolved three times - in 1976, 1986 and 1999 - as a result of conflicts with the government.
On the first two occasions, no fresh elections were called within the 60 days stipulated by the constitution and were branded unconstitutional by the opposition.
The emirate was plunged into a similar political crisis in January that saw the ousting of the ailing emir Sheikh Saad al-Abdullah al-Sabah for health reasons following the death of the previous emir Sheikh Jaber al-Ahmad al-Sabah on January 15.
Sheikh Sabah was ultimately chosen as the new emir and sworn in on January 29.