Spaniard Alonso is considering racing in other categories
Renault driver Fernando Alonso will consider leaving the sport if several big teams and manufacturers quit in the wake of the budget cap row.
Ferrari have failed in their appeal against governing body FIA's plan to limit team spending from next season.
And former world champion Alonso said: "If the big teams and the big manufacturers leave F1 then I don't want to race with the small teams.
"It is not F1 any more, and there are many other categories."
Ferrari's appeal against the FIA, which wants to introduce an optional £40m budget cap from 2010, was dismissed by a French court in Paris on Wednesday.
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The proposal has prompted Ferrari to threaten to quit F1, with Renault, Red Bull and Toyota holding a similar view.
The official deadline for entries into the 2010 world championship is 29 May.
"For me, it is strange no-one sat down and thought how much we are damaging the sport, how much damage the sport has had in the last two months," added Spaniard Alonso.
"To have those three or four new teams and to lose seven of the big manufacturers, I cannot understand, and not just losing the seven manufacturers, but losing the 10 best drivers in the world.
"F1 would not be interesting."
The Monaco Grand Prix takes place this weekend - and although Alonso is confident he will be fully focused on the race, he admitted the budget cap row has been a major distraction.
"I tried to switch off and concentrate on this business," said the 27-year-old.
"Here, in Monaco, I will be 100% focused on the Grand Prix.
"But it is true that last week when I was at home it was impossible to switch off because I didn't know if this would be my last time in Monaco."
The FIA's regulations for 2010 propose giving teams who accept the cap greater technical freedom than those wishing to carry on with unlimited budgets, such as Ferrari.
It says it wants to introduce the move in order to cut costs and ensure F1's survival amid the global financial crisis - along with encouraging new teams to enter the sport.