The approvals process for three new nuclear power stations had been suspended in March, pending a safety review, after the Fukushima disaster shook public confidence in the industry.
Last weekend, 20,000 people rallied against nuclear power in Switzerland, the largest demonstration of its kind since the 1980s.
There will now be no replacement for the country's oldest nuclear reactor, which is set to come offline in 2019.
Speaking at a televised news conference in Berne, Energy Minister Doris Leuthard said the decision would act as an incentive to invest in renewable technologies.
"It was important for the cabinet to say we see the potential and to send a clear signal to the economy, to the population, to potential investors [...] that we want this change and that it's possible," Leuthard told a news conference.
She said the government would have to plug the energy gap in the transition period by increasing electricity production from fossil fuels. It also aims to expand hydropower, develop new kinds of renewables and try to cut the demand for energy.
The transition cost would be around 0.4-0.7% of gross domestic product (GDP), the government said.
Business group Economiesuisse warned that the move could endanger Switzerland's energy supply, push up electricity costs and hurt the country's manufacturing sector.
"The decision to abandon nuclear power, albeit gradually, makes it more difficult to guarantee a secure and economical energy supply that is as free from CO2 as possible," the utility company BKW, which had hoped to build new Swiss nuclear plants, said in a statement.
The decision disappointed the Greens and the Social Democrats, who had called for an earlier end to nuclear power.
Neighbouring Germany is due to vote on its expected exit from nuclear power on 6 June and is expected to back a shut down of all its nuclear reactors within a decade.
EurActiv with Reuters