Sharon had vowed on Thursday to press ahead with an Israeli withdrawal from the Gaza Strip despite the humiliating rebuff from his own party over his pursuit of an alliance with Labour to forge a parliamentary majority for his plan.
Labour leader Shimon Peres, a strong proponent of ceding occupied land for peace with Palestinians, suggested Sharon had been too weakened by the revolt of Likud rightists to pursue talks with the main centre-left opposition.
"The opinion of the Labour Party today is to call for new elections and allow the people to decide," Peres, a veteran former prime minister and foreign minister, told journalists.
'As soon as possible'
He said elections, which do not have to be held until 2006, should take place "as soon as possible, the minute there is a majority in the Knesset," or Israel's parliament.
Sharon wants to evacuate 8000 Jewish settlers from Gaza next year, but that timetable would almost certainly be pushed back by early elections.
Peres would have to present a motion to dissolve parliament to the 120-member chamber, which is in recess until October.
Some Labour lawmakers were earlier doubtful they could win a parliamentary no-confidence vote to enable fresh elections. Sources close to Sharon said he wanted to avoid early elections but they could not be ruled out.
Likud's rightist Central Committee voted resoundingly at a convention on Wednesday to bar Sharon from forging a "national unity" coalition with Labour.
Polls show most Israelis support Sharon, regarding the coastal Gaza Strip as a bloody liability. Likud rebels argue that abandoning any land Israel captured in the 1967 Middle East war would "reward Palestinian terrorism".
Most Israelis support Sharon
regarding Gaza as a liability
If Sharon defies Likud's pro-settler hardliners as he has done before, he could provoke a schism in Israel's largest party or risk early elections, which could stall any withdrawal.
But if he complies, he will find it hard to muster a cabinet majority with his existing far-right partners to "disengage" from conflict with the Palestinians - even though his plan is backed by the United States and most Israelis.
Despite a weakened hand, Sharon signalled his intent to keep up efforts to reshape his coalition to restore the parliamentary majority he lost over the plan.
"The prime minister is continuing with the disengagement," Sharon's office said. "He will try to build a stable coalition government."