Hadi will "name a new prime minister within a week" and assign him with the task to form a national unity government, Xinhua reported citing the official Saba news agency.
The president also said the government would reduce fuel prices by 25 Yemeni riyals (12 cents) per litre to appease the mass protests which were triggered by a steep increase in fuel prices at the end of July.
This compromised an initiative that was made to resolve the prolonged standoff with Shia Houthi rebels who have been camping in and around the capital Sanaa for weeks, demanding the dismissal of the government and cut in fuel price.
Haidi: This initiative does not reflect our weakness
"This initiative does not reflect our weakness, rather we are ready for any alternative to address the rebellion," Hadi was quoted by Saba as saying at a conference in Sanaa.
According to Saba, Hadi called on the Shia Houthi leadership to withdraw fighters from inside and around Sanaa, retreat from the northern province of Amran and resort to a cease-fire against the army in neighbouring province of al-Jawf.
However, Mohammed Abdulsalam, the spokesman of the Shia Houthi rebels, rejected the initiative in a statement posted on the group's website, saying that "we are not going to dilute the national issues of our people".