"Unless there is a major shift in position from [Mugabe's] Zanu-PF, we will not accept this deal," the unnamed source said.
"We will resort to Plan B which is they might go it alone and they form their own government, as we are not prepared to accept anything that is not worthwhile for Zimbabweans."
Tsvangirai has asked the summit of 15 southern African leaders to set a deadline for an agreement on forming a cabinet.
"The political leadership owe it to the people of Zimbabwe and the region to show political maturity"
Kgalema Motlanthe, South African president
However, Welshman Ncube, secretary-gerneal of an MDC splinter group, said a decision would be made on Sunday.
"The heads of state and Sadc are now going into closed session and a decision will definitely be made today, which has to be acceptable to both parties," he said.
Kgalema Motlanthe, the South African president, urged Zimbabwe's political rivals to show "maturity" and resolve their differences.
"The political leadership owe it to the people of Zimbabwe and the region to show political maturity and political leadership for the good of the people," he said.
"It is disappointing. It is two months since the signing of the agreement and parties have still not reached the agreement of an inclusive government."
Time 'running out'
The two parties are deadlocked over the allocation of the home affairs ministry - a portfolio that controls the police and internal security.
Tomaz Salomao, the Sadc executive secretary said that Zimbabwean leaders must remain optimistic, warning that time was running out in the face of a growing humanitarian crisis.
"We always have to be optimistic on the Zimbabwe issue... Time is not on our side," he said.
"There is a humanitarian crisis, there are about five million people who are in need of food aid."
The South African government came out strongly this week, warning it would take a harder stance, along with Sadc leaders, as the stalemate threatened regional stability.
Themba Maseko, a government spokesman, said: "We believe South Africa and the region cannot be held to ransom by parties who are failing to reach agreement on the allocation of cabinet posts."