Mr Netanyahu, who has been in office since 2009, said the decision was a "unanimous" one and the poll will be held in April.
Under Israeli law, a national election had to be held by November 2019.
"The leaders of the coalition decided unanimously to dissolve parliament and go to a new election in early April", the spokesperson wrote on Twitter, quoting from a statement issued by Netanyahu's political partners.
The decision to head to the polls also comes as Attorney General Avichai Mandelblit is set to begin reviewing materials to decide on possible charges against Netanyahu this week, embarking on the most high-stakes stage yet of a several-year legal entanglement that has threatened to upend the country's political system.
But a new bill extending the military draft to Jewish ultra-Orthodox men appeared to be the final trigger for the government's downfall.
Mr Netanyahu, now in his fourth term as prime minister, has been governing with a razor-thin majority of 61 seats in the 120-member parliament.
The bill is controversial because ultra-Orthodox parties view conscription as taboo, fearing serving in the military will lead to immersion in secularism. But years of exemptions have generated widespread resentment among the rest of Jewish Israelis.
Earlier, Yair Lapid of the opposition Yesh Atid party announced he was rescinding his support for the bill, calling the coalition's hoped-for compromise a payoff to draft dodgers.More news: Macron Slams U.S. Decision of Troop Pullout in Syria
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He said the coalition's potential compromise was a bad deal and his party "will not give a hand to draft dodging".
Another victory for Netanyahu would assure his place in history as Israel's longest-serving leader and allow him to solidify his close alliance with President Donald Trump.
Holding elections while the possibility of criminal charges hang over Mr Netanyahu will allow him to claim the Israeli public voted for him with full knowledge of the allegations, Ms Tsurkov said.
Netanyahu, facing the possibility of bribery and breach of trust charges in three different cases, made scant mention of these investigations at a gathering of his Likud Party as he announced plans for what is expected to be an April 9 vote. Those bright prospects, however, could be derailed by a looming decision by the country's attorney general on whether to file charges against Netanyahu.
Netanyahu has angrily dismissed the accusations against him, characterizing them as part of a media-driven witch-hunt that is obsessed with removing him from office. "The people of Israel have re-elected me for a fourth time,"' Hazan explained, adding that if Netanyahu is re-elected, it would send a message to the attorney general that "you can not overturn the results of a democratic election".
The calling of early elections could delay the advancement of any U.S. peace plan however. "Let's not forget this is a government that no one thought would serve out its term", he said.
Former Prime Minister Ehud Barak called the election "the most fateful" since the assassination of then-Prime Minister Yitzhak Rabin in 1995.
"We have neutralized it and the operation is mostly over", he said.