The Cabinet, chaired by Prime Minister Narendra Modi, recommended to the President to revoke central rule imposed on January 26.
On Monday, 31 MLAs, led by Congress dissident Kalikho Pul, called on the Governor to stake claim for forming the next government in the politically fragile state.
He was accompanied by 19 rebel Congress MLAs along with 11 BJP legislators and two independent members.
This led the Congress to move the Supreme Court seeking an order that no new government formation be permitted and status quo maintained.
However, the apex court refused to pass an interim order restraining the Governor from swearing in a new government in Arunachal Pradesh.
The revolt by Congress dissidents led by Pul led to a political crisis in the state that finally led to imposition of President's Rule on January 26.
Former Chief Minister Nabam Tuki reportedly has the support of 26 MLAs in the 60-member Assembly.
Congress, which had 47 MLAs in the 60-member Assembly, suffered a jolt when 21 of its lawmakers rebelled.
Eleven BJP MLAs and two independents backed the rebels in the bid to upstage the government.
Later, 14 rebel Congress MLAs were disqualified by the Speaker.
The Supreme Court, which is considering pleas against imposition of President's rule in Arunachal Pradesh, is hearing petitions seeking examination of constitutional schemes on the scope of discretionary powers of the Governor.
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