Israel's Channel 2 television reported that Sharon had drawn up a two-phased strategy to move forward on the US-brokered peace "roadmap".
Initially, Israel would evacuate settlements, do away with checkpoints and withdraw from occupied territories in the West Bank.
If these measures failed, Channel 2 said that Sharon would unilaterally determine a border and complete work on a security barrier around eastern West Bank.
Such a move would leave the Palestinians with less than 40% of currently occupied land.
Channel 2 said Sharon was effectively telling Palestinian Prime Minister Ahmad Quraya: "This is your last opportunity to negotiate with me."
Israeli officials declined to comment on the report.
Sharon had said on Thursday that Israel would have to give up some occupied land for peace, but also hinted he would take unspecified "unilateral steps" should talks with the Palestinians on advancing the peace plan fail.
Under the roadmap, Israel had vowed to evacuate unauthorised settlements but has done little to prevent settlers from establishing new outposts since the launch of the peace plan.
The United States has penalised Israel for the barrier and settlement expansion by deducting nearly $290 million from a multi-billion-dollar package of loan guarantees.
Palestinians say the barrier, a line of concrete walls, electric fences and razor wire, is a bid to annex their land.