The decision was taken at a meeting of the Union Cabinet while taking up an agenda item "political situation in Andhra Pradesh" and "proclamation under Article 356 (1)", sources said.
The move comes in the wake of the resignation of Andhra Pradesh Chief Minister N Kiran Kumar Reddy following the government's decision to bifurcate the state.
Andhra Pradesh Governor E S L Narasimhan will hold the charge during the period of President's rule.
The term of the 294-member current Andhra Pradesh Assembly expires on June 2, 2014 before which elections are to be held. The Election Commission is set to declare Assembly polls alongwith the Lok Sabha elections in the next few days.
Ruling Congress in the state did not propose another candidate to succeed Reddy, who quit as an MLA as well as from the party protesting against the decision to create Telangana.
The bill to create the country's 29th state, by splitting Andhra Pradesh, was passed by Parliament in the just-concluded Winter Session.