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"There is definitely a regression here, and we must understand and admit that we are at a dead end," local daily Ha'aretz quoted the Yisrael Beiteinu party chief as saying at a party meeting.
"We definitely intend to present new ideas" on the unwieldy historic conflict between the two neighbors, added the deputy premier.
The blunt remarks came a day after U.S. President Barack Obama voiced in Turkey his belief in the Middle East peace prospect and called for political will and courage from both sides to make necessary compromises in order to achieve a two-state solution.
In response to Obama's call, the new Israeli government, led by traditionally hawkish Prime Minister Benjamin Netanyahu, said in a statement that Israel is committed to pursuing peace and will formulate its policies in the near future.
Lieberman's latest remarks bear the imprint of an aggressive approach manifested in his first speech as Israel's top diplomat on April 1, in which he said that making concessions will bring not peace but more wars.
In that eyebrow-raising address, Lieberman also rejected the U.S.-hosted Annapolis conference and stressed that Israel is only bound by the "road map" peace plan.
Apparently alluding to Lieberman's remarks, Obama said on Monday that a peaceful coexistence of Israel and a Palestinian state is "a goal that the parties agreed on in the road map and at Annapolis... Both must live up to the commitments they have made."
Lieberman's tough stance toward Israeli Arabs has triggered bitter controversy and racism accusations, and his presumptuous remarks in September that Egyptian President Hosni Mubarak could "go to hell" if he continued declining to visit the Jewish state, notably chilled relations between the two neighbors.