Mark Rutte's government has stepped down after thousands of families were wrongly accused of child welfare fraud and told to pay money back, reports BBC.
Families suffered an "unparalleled wrong", Dutch MPs decided, with tax officials, politicians, judges and civil servants leaving them powerless.
Many of those affected were from an immigrant background and hundreds were plunged into financial difficulty.
Mr Rutte submitted the cabinet's resignation to the king.
"Innocent people have been criminalised and their lives ruined," he then told reporters, adding that responsibility for what had gone wrong lay with the cabinet. "The buck stops here."
The "unanimous" decision, taken at a cabinet meeting in The Hague, comes at a key moment in the Covid-19 pandemic.
The Netherlands has gone into lockdown and ministers have been considering stiffer measures to halt the spread of infection.
The government will stay on in a caretaker role to tackle the pandemic until parliamentary elections in March but Economics Minister Eric Wiebes has quit with immediate effect for his role in the scandal. Asked whether the cabinet's resignation was merely symbolic, Mr Rutte was adamant that it was not.
This is not the first time a Dutch government has resigned en masse in a gesture of collective responsibility. In 2002, the cabinet stood down after a report criticised ministers and the military for failing to prevent the massacre of Muslims at Srebrenica during the Bosnian war seven years earlier.
What the wrongly accused parents say
The scandal began in 2012 and the number of parents involved could be as high as 26,000. Some openly called for the government to step down, saying they had lost faith in the ability of the cabinet to clean up the system.
One mother faced demands to pay tax authorities around €48,000 (£42,000). She tried to explain to the authorities that mistakes had been made but officials then started withholding not just childcare allowances but other benefits too.
Her rent went into arrears and energy companies refused to provide a regular supply. Eventually she lost her job and could not find another as she was seen as a fraudster. Her relationship with her child broke down as the pressure took its toll.
"There are people in [the cabinet] who allowed it to happen, have allowed it to carry on and ultimately wanted to cover it up," one parent told RTL Nieuws.
What happens next?
Mr Rutte's liberal VVD party is performing well in the opinion polls, so the 17 March election could see another Rutte-led administration. He has already led three governments since 2010.
Although he initially opposed the cabinet's resignation, it was seen as inevitable once the opposition Labour leader Lodewijk Asscher resigned on Thursday in response to the scandal. Mr Asscher was social affairs minister under the previous Rutte coalition government.
Mr Rutte heads a four-party centre-right-liberal coalition and his party leads the latest opinion polls, ahead of far-right leader Geert Wilders.
media captionDutch PM Mark Rutte cleared up his own mess in 2018 when he spilt coffee in the parliament building
However, victims of the childcare allowance scandal who had to repay large sums paid out in benefit have this week filed a formal complaint against several current and former ministers.
Compensation to the tune of at least €30,000 (£26,000) each is to be paid out to parents who were wrongly accused, but many have argued it is not enough.
Ahead of the government's decision to step down, Sigrid Kaag, the leader of the liberal D66 party said it was "important to be politically accountable and to take responsibility for the content of the report and for the injustice done to the parents".
Finance Minister Alexandra van Huffelen said children caught up in the fraud scandal should also be looked after so they could "soon move on".