Thousands of state workers will be laid off, state parks will be shuttered, the issuance of fishing licenses will be halted and the Minneapolis zoo will be closed.
Road projects will also grind to a standstill just as people hit the road for the holiday.
A midnight deadline passed without an agreement as talks between Democratic Gov. Mark Dayton and top Republicans unraveled over Dayton's proposal to impose taxes on the state's top earners, a move on which top GOP officials have refused to budge.
Dayton said he and state Republicans, who showed up late at the capital Thursday night asking to meet with him, are still fundamentally divided on Minnesota's future for the next two years, and that he saw no way of avoiding a shutdown, according to the Associated Press.
"It's significant that this shutdown will begin on the Fourth of July weekend," Dayton said in a news conference late Thursday night. "On that date we celebrate our independence. It also reminds us there are causes and struggles worth fighting for."
Dayton said he has been clear with state GOP leaders for several months that that he is unwilling to agree on anything other than a total budget approach.
GOP leaders said the two sides were closer than Dayton is leading on, and have criticized his refusal to call a special session to pass a "lights on" budget bill, which would maintain safety funding at current levels to keep government running. GOP leaders have said that the bill is a two-page document that is ready to be passed, according to Minneapolis- St. Paul ABC News affiliate KSTP.
"I think the governor's insistence that we pass a full budget is not going to be of much comfort to Minnesotans who are going to see delays on the highways because construction projects stop," Senate Majority Leader Amy Koch said. "It's not going to comfort people who can't use our state parks, or who can't get a driver's license."
"If the governor is willing to negotiate, I'll be right here on the Fourth of July," Koch said Thursday night.
Dayton did acknowledge that GOP leaders offered a K-12 education shift, as well as using some tobacco settlement money to bridge a gap between the two opposing sides, according to KSTP. Talks didn't go anywhere, though, and Dayton said he sees no other way other than shutting down the government, in what he calls a "fair deal for Minnesotans," KSTP reported.
Some programs that will continue unabated include critical services including the State Patrol, prisons, disaster response and federally funded health, welfare and food stamp programs.
Only four other states -- Michigan, New Jersey, Pennsylvania and Tennessee -- have had shutdowns in the past decade, some lasting mere hours. Minnesota's government partially shut down under then-Gov. Tim Pawlenty in 2005 over a budget fallout.
The Associated Press contributed to this report