Israel would take the steps in a few months unless Palestinians changed their leadership, he said on Monday to a stormy parliament session.
Sharon's deputy, Ehud Olmert, said in an interview published on Monday Israel would start to implement unilateral measures in about six months if no agreement was reached with the Palestinians in the framework of the US-backed "road map". The blueprint is aimed at ending the Palestinian-Israeli conflict.
Palestinian President Yasir Arafat's top adviser Nabil Abu Rudaina said Sharon's plan was aimed at derailing peace efforts and violated the "road map".
While the plan has angered the Palestinians who fear it will complicate any future two-state settlement, settlers have also vowed to oppose what some have described as the forcible "transfer of Jews" by a man who once urged them to "seize the hills".
Several lawmakers from Sharon's own Likud party and cabinet ministers from ultra right-wing parties were among the 100,000 strong crowd at a pro-settler rally in Tel Aviv on Sunday. Sharon argued that members of his government had in effect given their approval to settlement evacuations by endorsing the "road map".
The Israeli prime minister again accused Palestinians of not meeting commitments set in the "road map".
Israeli members of Knesset
supported Sharon's threats
The blueprint is in a deadlock with high-level contacts frozen for nearly five months. Israel has yet to meet conditions of the blueprint, including the dismantling of Jewish settlements on the occupied West Bank and Gaza Strip.
Under international law, all settlements are illegal, a stance not recognised by Israel.
Sharon also demanded Palestinian Prime Minister Ahmad Quraya should gain control of the security apparatus in order to dismantle resistance groups Hamas and Islamic Jihad. So far, the Palestinian Authority has not bowed to such demands, saying it will cause a civil war among Palestinians.
Quraya's predecessor Mahmud Abbas resigned in September after losing a power battle with veteran Palestinian President Yasir Arafat for control of the unwieldy security apparatus.
The United States lashed out at both sides for failing to make progress on the path to peace.
Settlement construction must stop since it is undermining Israeli and Palestinian interests, said deputy assistant secretary of state for Near Eastern affairs David Satterfield in Washington.
Satterfield, whose immediate boss William Burns is heading to Cairo to urge the Egyptians to do more to press the Palestinians to halt anti-occupation attacks, also criticised the apartheid wall Israel is constructing, cutting off parts of the West Bank.
The barrier slices off some of the most fertile parts of the occupied West Bank while leaving thousands of farmers cut off from their land.
Satterfield also demanded Palestinians should increase the pace of reform and do more to curb resistance groups.
Under the terms of Sharon's so-called disengagement plan, first unveiled last month, Israel is likely to evacuate a small number of settlements, but strengthen its control over others.
Many of the settlements dismantled so far have been empty.