Ukrainian President Viktor Yushchenko said his country's young democracy was resilient and would not accept any interference from Moscow in a crisis sparked by Russia's war with Georgia last month.
"I officially announce the collapse of the coalition of democratic forces," parliament speaker Arseny Yatsenyuk told lawmakers.
"I would not call this an apocalypse. It is a challenge for democracy," he said.
Less than four years after President Viktor Yushchenko and Prime Minister Yulia Tymoshenko united against a Moscow-backed presidential candidate in the Orange Revolution, their political marriage lay in tatters.
Tensions between the president and prime minister came to a head last month following Russia's war with Georgia, with Yushchenko's allies accusing Tymoshenko of "high treason" for not supporting Georgia enough against Russia.
Tymoshenko has rejected the charge, saying she is no Kremlin ally.
European officials have warned Ukraine could be the next target for interference by Russia because of the high proportion of Russian-speakers and tensions over Russia's Black Sea fleet, based in southern Ukraine.
But Yushchenko on Tuesday said his country could withstand any pressure.
"Ukraine's democracy will not give up... The nation is on the path to democracy and it won't accept any scenario that is imposed from far away," Yushchenko said in a thinly-veiled reference to Russia.
He also accused Tymoshenko of plotting with the pro-Moscow opposition against him to form a new governing coalition in negotiations that had a "cynical, behind-the-scenes and treacherous character."
Reacting to the collapse, Georgian President Mikheil Saakashvili, a close ally of Yushchenko in trying to integrate with the West and particularly with the NATO alliance, said he was "worried" by the events.
"There are also signs of lots of outside interference and meddling," Saakashvili said, apparently referring to Russia.
The prime minister could now start trying to build a new coalition, possibly with the pro-Russian Regions Party.
Tymoshenko said at a meeting with regional leaders: "The government is going to work for a long time and is going to work successfully despite all these storms... Because this is a storm in a teacup."
The political crisis began when Yushchenko pulled his Our Ukraine party out of the coalition on September 3 after Tymoshenko sided with the pro-Moscow opposition to pass new laws rolling back the president's powers.
Yushchenko bitterly described the vote against him as a bid by Tymoshenko to establish a "dictatorship" and complained of a parliamentary "coup."
Tymoshenko in turn accused the president of having "destroyed" the governing coalition by pulling out of the alliance with her party.
Fresh parliamentary elections would be the third in two years for Ukraine.
Tymoshenko and Yushchenko were the icons of the 2004 pro-Western Orange Revolution, but since then have been embroiled in persistent and sharp disagreements on domestic political issues.
The political crisis comes ahead of a key presidential election due in 2009 or 2010, which is expected to pit Yushchenko against both Tymoshenko and Viktor Yanukovych, who leads the Regions Party, and will be closely watched in Western capitals.
Ukraine is a key transit country for Russian gas exports to Europe.
The crisis has set back Ukraine's NATO and EU aspirations as well as raising eyebrows in Washington. US officials badly want Tymoshenko and Yushchenko to work together to bring the ex-Soviet nation out of Russia's orbit.
US Vice President Dick Cheney urged unity during a visit to Kiev earlier this month as he toured the region trying to bolster America's ex-Soviet allies following the conflict between Russia and Georgia.
That conflict and the ensuing fallout have served as a reminder that Russia finds it hard to stomach NATO or EU encroachment eastwards into what it sees as its historic sphere of influence.
People in the southeast of Ukraine are mainly Russian-speaking, while those in the northwest predominantly speak Ukrainian and are more oriented towards integration with the West.
Yushchenko last month earned Russia's wrath by imposing restrictions on the Russian navy. Under a lease arrangement, Russia's Black Sea fleet is based at Sevastopol on Ukraine's Crimean coast until 2017.