Rubbish has piled up on beaches, in mountain forests and river beds across Lebanon since the closure in July of the country's largest landfill at Naameh, just south of Beirut.
Since then, government proposals to have the rubbish exported or treated in Lebanon have fallen flat.
On Saturday, Information Minister Ramzi Jreij said authorities would reopen the Naameh landfill as part of a "four-year" plan to resolve the crisis.
Naameh would be reopened for two months "to take in the trash that has already piled up", he told reporters after an emergency cabinet session.
Two other "temporary" landfills equipped to treat the waste would be opened in Beirut's suburbs, he added.
As the cabinet met, around 3,000 demonstrators marched to central Beirut demanding a permanent solution to the crisis.
The demonstration called for by the "You Stink" protest movement was the first by civil society groups in several months and had been touted as a "final warning" to the government to take action.
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The demonstrators carried banners calling for the "fall of the government".
In past demonstrations, protesters have repeatedly rejected the reopening of the Naameh landfill, calling for a comprehensive and long-term solution to the crisis.
Naameh was set up in the early 1990s as a temporary measure.
"The final warning has been sent, and we are now in a new phase. On Monday we will paralyse the country," the protest organisers said in a statement on Saturday.
Earlier this month "You Stink" posted on its Facebook page a jarring video of mountains of trash festering across Lebanon.
In one of the shots filmed by a drone, plastic bags containing rubbish can be seen stretching for miles like a flowing river.
The footage, which was widely shared ahead of the demonstration, mocked the tourism ministry over a video it had commissioned to highlight Lebanon's natural beauty.
In September, the government approved a plan to end the crisis but it was never implemented.