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The Southern Transitional Council (STC) accused the government of failing to perform its duties and of "conspiring" against the southern cause, and said self-governance had begun at midnight.
The Taliban order, which was soon followed by an announcement via Twitter from Afghan President Ashraf Ghani announcing the government "extends the offer of peace," comes just days after US peace envoy Zalmay Khalilzad was in Kabul and Doha.
Calm prevailed across much of Afghanistan, with officials not reporting any major clashes between the two foes since the truce began on Friday to mark the Muslim festival of Eid Al Adha.