It is also cancelling annual bonus payments as part of a series of measures aimed at saving $118m (Â£89m) in employment costs.
In July, civil servants went on strike over delays in the payment of their salaries.
The country is going through its toughest economic situation since the hyper-inflation of 2008.
Speaking to parliament on Thursday, Finance Minister Patrick Chinamasa said that currently the government wage bill takes up nearly 97% of the revenue it receives.
He hopes to bring that figure down to 75% by the end of next year.
The 25,000 job losses, which amount to 8% of the civil service workforce, were described in the state-owned Herald newspaper as a "bold measure" to reduce "unsustainable" spending.
Last year, Mr Chinamasa made similar proposals which were then blocked by the cabinet.
In the past few months, the government has struggled to pay civil servants' wages including those of soldiers, teachers and health workers.
The delay led to one of the biggest strikes the country has witnessed in years, in July.
The government is finding it hard to raise revenue amid an economic collapse.
The BBC's Brian Hungwe in Harare says more than 10,000 companies have shut in the last decade.
He adds that President Robert Mugabe blames his economic woes on sanctions, but his critics blame what they call ruinous economic policies and corruption within his government.
To add to the country's woes, a severe drought has left many people dependent on food aid.
Zimbabwe's government is axing 25,000 civil service jobs in an effort to rein in government spending.