Fianna Fail leader Micheal Martin has ramped up pressure on Taoiseach Leo Varadkar by saying he would enter government formation talks with Fine Gael.
Mr Martin's U-turn on talking to Fine Gael came after he ruled out Fianna Fail entering a coalition with Sinn Fein.
However, the country is braced for weeks of uncertainty as Mr Varadkar will speak to Mr Martin only as a last resort.
The Fine Gael leader will begin negotiations with Mr Martin only after Fianna Fail and Sinn Fein fail in their attempts to form a government.
"If Fianna Fail and Sinn Fein fail in its negotiations then we will consider matters at that point," his spokesperson said.
With talks set to go on for weeks, the spokesperson also revealed the Government would not be making any "major financial or policy decisions" until a new administration is formed.
Mr Martin yesterday held a four-and-a-half hour meeting with his parliamentary party in a bid to ease tensions after a disastrous election campaign.
He sought their permission to enter talks with all political parties apart from Sinn Fein.
The proposal was supported by the majority of his party but concerns were raised by a group of TDs about doing a deal with Fine Gael. Asked on RTE's Six One whether a grand coalition was now in sight, Mr Martin said it would take a lot of work to create a programme for government.
"Any government that's formed has to be sustainable. I believe a government should be formed," he said.
"In terms of the future, I can't be certain how this is going to work. I wouldn't rule out another election because this is going to be so difficult."
Mr Martin said each of the main parties will nominate leaders for taoiseach when the Dail returns next Thursday but none will succeed.
"We won't get a resolution next Thursday," he said.
However, he added that finding a new government shouldn't take 70 days like in 2016.
Put to him that he was breaking his pre-election promises on coalition formation, Mr Martin said Sinn Fein had changed its position from two days ago.
"Sinn Fein did say two days ago the last party they want in government is Fianna Fail and two days later I get a letter," he said.
Yesterday, Sinn Fein leader Mary Lou McDonald said it would be "quite a challenge" for Fianna Fail to sign up to the "government of change" that she was proposing, but said there was an obligation on the party to consider the matter.
After writing to Mr Martin to seek discussions, Ms McDonald said the position of Fianna Fail not to speak to Sinn Fein at all was "untenable".
She also criticised efforts by Fianna Fail and Fine Gael to form a grand coalition, saying it would be "a slap in the face to the Irish electorate".
The Taoiseach's spokesperson said there was a responsibility on Sinn Fein to form a coalition with left-wing parties or with Fianna Fail and negotiate a "republican socialist programme for government" that "keeps the many promises they have made".
"In the meantime, the Government will continue with its duties as required by the constitution and any major financial or policy decisions will be deferred until a new government is formed," he added.
A Green Party source said that, while it will hold exploratory talks with all parties, it does not expect to see any substantial developments until next week.
"The five main strands for us are how are we going to pay for it all, what are we going do on housing, how are we going to pay for Slaintecare, what are we going to do on climate change, and Brexit and the future of Europe," the source said.