Plaid Cymru leader Ieuan Wyn Jones has accused Welsh Labour of "arrogance" and a "lukewarm approach" after pulling out of talks over a power-broking deal.
Mr Jones said discussions would continue with the Conservatives and Lib Dems about an "exciting" programme for a Plaid-led assembly government.
But a statement from four of Plaid's 15 AMs said working with the Tories would be a "clash of principles and values".
Welsh Labour leader Rhodri Morgan said he was extremely disappointed.
Labour is five seats short of an overall majority in the Welsh assembly.
If a Plaid alliance with the Tories and Lib Dems went ahead, it would result in the first Conservative ministers anywhere in Britain since 1997.
Labour had hoped Plaid would agree to help it stay in power, but talks broke down on Tuesday.
Plaid's decision came after a five hour meeting in which the party's assembly group considered two proposals - one from Labour and the other from the Tories and the Lib Dems.
Ieuan Wyn Jones said he was "absolutely confident" of getting an agreement on the document with proposals for forming a coalition with the Tories and Lib Dems.
He said Labour's proposal was very late and had a number of unanswered questions.
Mr Jones said a Plaid-led government would deliver an "exciting and radical programme for government" that would make a real difference to the lives of people in Wales.
"People will really be excited by it because it will do enormous things for the health service, for education.. and for the environment," he said. "This is a new way of doing things. We want to face this in a mature, responsible way and I am confident that when people see the programme that we have got together they will be able to support it."
But four Plaid AMs, Leanne Wood, Bethan Jenkins, Helen Mary Jones and Nerys Evans, issued a statement opposing any deal with the Conservatives.
Ms Jones, a senior party figure and the party's health spokeswoman before the May election, said she had not met one person in her Llanelli constituency who was in favour and said it would cause "electoral damage".
HOW THE ASSEMBLY STANDS
Labour - 26 seats
Plaid Cymru - 15
Conservatives - 12
Liberal Democrats - 6
Independent - 1
She added Plaid did not have "enough in common" with the Conservatives in terms of long-term principles and values to be able to put together a "truly sustainable prgramme of government".
"We also believe that in many of the communities... the legacy of what happened in the '80s and '90s is still very sharply felt by people, she said, claiming that there were other, unnamed, members of the party who agreed with her views..
However, if the programme proposed is passed in crucial meetings of each of the Welsh parties over the next few days, it would see Mr Jones nominated as the new first minister for Wales at a special session of the Welsh assembly next week.
This would put nationalist first ministers in charge of both Wales and Scotland for the first time since the devolution of power across the UK in 1999.
Rhodri Morgan said he was extremely surprised at Plaid and said allegations Labour had been "tardy" in responding to Plaid were not true.
"We have been negotiating in good faith," he said.
"But really it goes deeper than that - it is about Plaid allowing or even encouraging Tory ministers back into running public services."
He added that if Plaid worked with Labour, it would be more likely to see its policies progress.
"We are a channel to Westminster where you need a bit of help from the Westminster end and obviously, if we are in opposition, we are not in a position to do that."
The Plaid group met for several hours on Tuesday
Nick Bourne, the leader of the Welsh Conservatives, said Mr Jones's decision to suspend talks with Labour, was "a significant development which makes a non-Labour administration governing Wales a real possibility".
"Welsh Conservatives have always argued for the need to establish stable, lasting government in the National Assembly.
"We are committed to continuing talks with Plaid Cymru and the Welsh Liberal Democrats to achieve that."
Lib Dem leader Mike German also welcomed the announcement.
"Now we are all focused on a single outcome, I hope we can hammer out the remaining issues both on what we will do together, and how we will achieve it, in order to put forward a plan to each of our parties to consider," he said.
"Each of us is committed to giving Wales a fresh start. This announcement has taken us another step in that direction."