The decision came 18 months after the ICC issued a warrant for the wife of former president Laurent Gbagbo for suspected crimes against humanity.
Ivory Coast's cabinet decided to file a "motion to dismiss" the warrant and not to send Simone Gbagbo to The Hague, where her husband awaits trial over months of deadly violence that followed 2010 polls.
"The decision of the cabinet aims to have Mrs. Gbagbo brought to trial... By Ivorian courts whose good reputation has been restored and which can hold a fair trial that will guarantee the rights of the defence," said a government statement.
"If we had the slightest doubt about the fairness of the Ivorian legal system, we would have extradited her to the Netherlands," government spokesman Bruno Kone told AFP.
Contacted by AFP, a spokesman for the former president's Ivorian Popular Front (FPI) party would not immediately comment.
The government will inform the ICC of its decision shortly, the statement added.
Simone Gbagbo was detained at Odienne in the country's northwest after the post-election crisis caused by her husband's refusal to acknowledge his defeat in the November 2010 presidential elections.
The former first lady, who was born in 1949, is also under investigation for suspected genocide, harming state security and white-collar crimes.
Last month 14 close aides to the former leader including his son Michel were freed but restrictions apply.
Opponents of President Alassane Ouattara, the winner of the 2010 election, accuse him of carrying out "victor's justice" as no one from his own camp has had to face prosecution.
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