Israeli Labour opposition leader Shimon Peres has called for early elections, after Prime Minister Ariel Sharon was rebuffed by his own Likud party.
Peres has never led Labour to election victory
Mr Sharon has vowed to press ahead with a contentious plan to pull Israeli settlers and troops from Gaza - the issue behind the Likud mutiny.
He has been seeking a coalition with Labour, which backs the Gaza plan.
But analysts say that Mr Peres' call for early election now appears to rule out a national unity government.
On Wednesday 58% of Likud central committee members voted against a coalition with Labour.
Mr Sharon was defiant after the vote, insisting it was non-binding and warning opponents against starting a civil war within Likud.
On Thursday his office said the prime minister - who lost his parliamentary majority over the proposed Gaza withdrawal - would continue to "try to build a stable coalition government".
However Mr Peres, who advocates exchanging occupied land for peace with Palestinians, suggested Mr Sharon had been too weakened to be an effective coalition partner.
"We cannot entrust the fate of Israel to the hands of 800-900 people [Likud rebels], when we see that a majority of the country unequivocally support disengagement" from Gaza, he said.
The opinion of Labour, he said, was "to call for new election and allow the people to decide".
Pullout from all 21 settlements in Gaza and 4 in West Bank
Preparation period to end by March 2005
Four-stage evacuation to be completed by end of 2005
Cabinet votes on each stage
Some of Mr Sharon's own aides have also suggested elections within the next six months - although the prime minister's term has more than two years to run.
Our correspondent in Jerusalem, Jon Leyne, says that it is not clear anyone really wants an early election.
He says the Labour party would be unlikely to win an early election and even victory would not solve Likud's internal arguments.
Under his disengagement plan more than 7,000 Jewish settlers would be pulled out of the Gaza Strip over the next 16 months, along with the Israeli troops protecting them.
Israel would continuing to exercise control over Gaza's borders, coastline and airspace.
Four isolated settlements in the northern West Bank would also be evacuated.
Likud rejected the plan in May, and Mr Sharon lost his majority in June.