Ms Livni (centre) briefed Mr Peres on the situation at the president's residence
Israeli President Shimon Peres has told the parliament that there is no chance of forming a government, setting the country on the road to elections.
It comes a day after Tzipi Livni, the head of the largest party, Kadima, said she had failed to form a coalition.
Foreign Minister Ms Livni was voted leader of the centrist party after outgoing PM Ehud Olmert stepped down amid corruption investigations.
General elections are now expected in or close to February 2009.
The parliament, known as the Knesset, has up to 21 days during which any of its members could, with the backing of 61 of the parliament's 120 MKs, attempt to form a coalition.
But correspondents say it is highly unlikely anyone will do this successfully. Elections will then be called within 90 days.
Earlier on Monday, Kadima submitted a motion calling for parliament to vote to dissolve itself in a move seeking to bypass the 21-day waiting period and bring elections forward.
But Mr Peres's announcement means the three-week period will now stand.
The next parliamentary poll had been scheduled for 2010.
Opening the Knesset's winter session, Mr Peres warned that public trust in political leaders had waned:
"At this time the Knesset and the political system must examine itself with a critical eye. We must not allow this unpleasant truth to be hidden. It's never too late to fix things," he said.
Mr Olmert said he intended to remain prime minister in his current caretaker role until a new government was formed after the expected polls.
He said Ms Livni "made an honourable attempt to form a government".
Developments could open the way for right-wing leader Binyamin Netanyahu
Binyamin Netanyahu, leader of the Likud party, which is neck-and-neck with Kadima in the polls, used the event to outline his party's centre-right platform.
He said that if he became prime minister, he would seek peace with neighbouring countries, but stressed he would not give up the Golan Heights or negotiate over the division of Jerusalem.
Mr Olmert's government has been involved in indirect talks with Syria over a deal widely thought to involve returning the Golan Heights, occupied in the 1967 Israeli-Arab war.
The status of Jerusalem was one of the issues that Ms Livni's talks with the religious party Shas broke down over.
The party, often a crucial kingmaker in Israeli governing coalitions, is strongly opposed to negotiating on the status of the city.
Israel sees Jerusalem as its eternal, undivided capital, but the Palestinians want to locate the capital of a future state in the east of the city.
As foreign minister, Ms Livni had been heading talks with the Palestinians, but negotiations have effectively ground to a halt.
Details of the talks have not been made public, but correspondents say that peace negotiations are meaningless unless the issue of Jerusalem is at least on the table.
Ms Livni is thought likely to face a tough battle against Mr Netanyahu in the expected election.
But although he was well ahead in July when Mr Olmert announced his plans to step down, Ms Livni has since narrowed the gap.
A poll by the Dahaf Research Institute, conducted on Sunday, projected the Kadima party's number of seats unchanged at 29, slightly ahead of Likud on 26 - which is a massive predicted gain from the opposition party's 12 seats in the current Knesset.