Liberal Premier Jeremy Rockliff, who has governed in minority since May, announced a March 23 poll after being given the green light by the state's governor on Wednesday afternoon.
"This election is about who is best able to restore stability and certainty," he said.
"Parliament has become unworkable. I'm not going to allow myself or my government to be held to ransom for the next 12 months.
"It's bad for Tasmania and it's bad for Tasmanians.
"I have taken the decision to call an election, so that Tasmanians can have their say."
Rebecca White said Labor was ready for an early poll and announced a policy to cap power prices. (Rob Blakers/AAP PHOTOS)
The Liberals were elected for a record third consecutive term in 2021 with 13 of 25 lower house seats.
Australia's only Liberal government was plunged into minority when John Tucker and Lara Alexander quit the party to sit as independents.
The pair propped up the government with votes of supply and confidence, but rejected a recent ultimatum from Mr Rockliff for a new more restrictive deal.
Mr Rockliff met cabinet and party parliamentary colleagues on Tuesday, securing unanimous support for an early election.
Tasmania's next poll was due by May 2025.
Opinion polls have shown it will be difficult for either major party to form majority government, with the state's lower house increasing from 25 to 35 MPs.
Mr Rockliff ruled out doing deals with the Greens to form a minority government, but said he would be "open to conversations" with others.
However, he said he would not compromise Liberal policies or trade ministries.
Labor leader Rebecca White said her party was ready for an early poll, and announced a policy to cap power prices.
"A Labor government will do this in the first 100 days of being elected, saving Tasmanian households $400 on their power bills," she said.
"After 10 years of the Liberals, it's time for urgent action on the cost of living."
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