The motion, proposed by the Central Bank of Iran, was ratified during a cabinet session.
The plan will be proposed to the Parliament as a double-urgent motion, the government spokesman Ali Rabiei said.
To be signed into law, the bill needs to be ratified by the lawmakers and the Guardian Council.
The CBI says its governor, Abdolnasser Hemmati, has already made it clear for the lawmakers at a parliamentary commission meeting that the Central Bank has full control over the foreign currency market and administers the situation to maintain the balance of currency rate with prudence and with regard to the market factors.
Proposals to remove four zeros from the currency have been floated since 2008, but the idea has gained strength as the rial lost more than 60 percent of its value in 2018 despite a recent recovery in defiance of US sanctions.
The currency was trading at about 119,000 rials per US dollar on the unofficial market on Wednesday, according to foreign exchange websites.
Rial weakness disrupted Iran’s foreign trade last year and helped boost annual inflation fourfold to nearly 40 percent in November.
In December 2016, Iranian President Hassan Rouhani’s cabinet had approved a motion put forward by the Central Bank to change the national currency from rial to toman, leading to a ten-fold decrease in banknote denomination.
Toman has been long used as the unofficial unit of money in Iran, while rial and dinar have been the country’s formal currency and non-decimal currency, respectively.