Ukraine will reverse the controversial sale of state-owned steel mill Kryvorizhstal so that the firm can go back on the market at a higher price.
Ukraine has been accused of selling state assets too cheaply
Kryvorizhstal was sold to a group of investors that included the son-in-law of former President Leonid Kuchma.
The winning bid in the privatization was $800m (£429m), and Ukraine rejected higher offers from foreign companies.
Prime minister Yulia Tymoshenko said her government was cancelling "illegal" decisions by the former administration.
"All documents which the former government approved illegally have been cancelled," Ms Tymoshenko said. "This means that we have begun the process of turning Kryvorizhstal back into state property."
The announcement came after the first meeting of Ukraine's new government cabinet.
It was appointed by President Viktor Yushchenko after he won an drawn out and scandal-hit election.
Mr Yushchenko has said he is keen to forge closer ties with the European Union, while his predecessor preferred allying Ukraine with Russia.
The government plans to sell Kryvorizhstal as quickly as possible via a transparent auction.
Accusations of corruption and nepotism have dogged Ukraine for years, with the sale of Kryvorizhstal, one of the world's largest steel plants, coming in for particular criticism.
The group that won the auction in June last year contained Viktor Pinchuk, the son in law of President Leonid Kuchma.
A consortium of international firms LNM and US Steel had offered $1.5bn for Kryvorizhstal.
The company employs 52,000 people, and has pre-tax profit of about $300m.