Narayan Sawant, working President of the state's oldest regional outfit, told reporters on Tuesday the party will no longer be part of the ruling alliance that also includes NCP.
MGP will either go alone or forge a pre-poll alliance with main opposition BJP, he said.
MGP Central Committee, which met here yesterday, decided to ask its legislators Ramakrishna Dhavalikar and Dipak Dhavalikar to withdraw support to the Digambar Kamat Government.
The party has two MLAs in the 40-member assembly. The pull out by MGP will not affect the stability of the Congress-led coalition which remains in majority with 23 seats.
Three legislators? two from BJP and one of NCP - have already resigned from the Assembly, bringing down its effective strength to 37.
MGP had extended support to the Congress-led alliance after the 2007 elections.
Dhavalikar was later inducted into the Cabinet, while Dhavalikar was appointed Chairman of Goa Horticulture Corporation and Kadamba Transport Corporation Ltd.
MGP is already in talks with BJP for a pre-poll tie-up. The talks are heading in the right direction, Sawant said.
MGP will declare its list of candidates on February 3.