Berlusconi, who has twice been Italy's prime minister, "totally" rejected plans for a transitional government in talks with Franco Marini, the senate speaker.
"We hope ... the head of state will call elections immediately," he said.
Marini had been ordered by Giorgio Napolitano, Italy's president, to form an interim government to oversee changes to Italy's voting system if talks with Berlusconi and Gianfranco Fini, Berlusconi's main ally, were successful.
But Berlusconi's refusal promted Marini to give up on trying to form a temporary government.
"I could not find a significant majority on a precise electoral reform," the Senate speaker later told reporters, as he left the presidents office having handed back his mandate to try to form a new government.
The right-leaning opposition, sensing a quick return to power after Romano Prodi, the former prime minister, resigned on January 24, has repeatedly dug in its heels over the temporary government.
Berlusconi said he wanted elections "because the country quickly needs an efficient government to solve its grave problems".
He said that reaching an accord with the centre-left was "unrealistic" but that he would be willing to open talks on reform once elections had been held.
Surveys in the Italian media indicate the centre-right would win an election.
Prodi, now caretaker prime minister, said he supported the plans for electoral reforms, but was pessimistic over the chances of an interim government being formed.
"We're all behind Marini's efforts but Berlusconi's position will be decisive," he said.
"So far he has been deeply negative and keeps urging elections now."
Italy has had on average a government a year for the last six decades.
Many economists and business leaders favour electoral reform, hoping for greater stability and warning that another government elected under current rules will prove just as unstable as Prodi's.
More than 800,000 people, well above the necessary threshold of half a million, signed a petition last year calling for a popular referendum on electoral reforms.