The move, which appears to break normal legal channels to resolve issues between the powers of government, sparked resignations by key ministers from Castillo's government and allegations of a "coup" by members of Congress and others.
In an address, Castillo announced a "government of exception" and called for new legislative elections to take place. He said he would respect the current economic model of the country, the world's No. 2 copper producer, while Congress was temporarily dissolved.
It was unclear whether Castillo would actually be able to dissolve Congress. Lawmakers appeared set to move ahead with the impeachment debate and vote, the third attempt to impeach the leftist former teacher since he came to office last year.
"In response to the clamor from citizens throughout the country, we make the decision to establish an emergency government aimed at restoring the rule of law and democracy," Castillo said in a speech.
Castillo's allies appeared though to be deserting him as the country's equities, bonds and sol currency slid. His economy minister and Foreign Minister Cesar Landa resigned, saying the move "violated" Peru's constitution.
"I strongly condemn this self-coup," said Landa, adding that Castillo had made the decision without his knowledge or support.
The office of Peru's Attorney General Daniel Soria said he would will file a criminal complaint against Castillo, accusing the president of "flagrantly violating the constitution".
Others, including former Peruvian President Ollanta Humala and other former ministers, called Castillo's move a "coup d'etat".
"A coup cannot be supported by any democrat. My total rejection of an unconstitutional closure of Congress," said Castillo's former economy minister Pedro Francke on Twitter. "Whoever intends to establish himself as a dictator cannot continue the presidency."
The head of Peru's Constitutional Court said that Congress should call Vice President Dina Boluarte to assume power.
Peru, which has gone through years of political turmoil, has seen major stand-offs between the president and Congress before.
President Martin Vizcarra dissolved Congress and was later impeached in 2020. Three decades ago, former president Alberto Fujimori, currently in prison for human rights abuses and corruption, also announced the dissolution of Congress.
(Reporting by Marco Aquino; Writing by Valentine Hilaire; Editing by Anthony Esposito, Bill Berkrot and Rosalba O'Brien)
By Marco Aquino
