In an interview with Newsweek magazine, he said he was only ready to accept the concept of a Palestinian state provided that Israel controlled its external borders.
Mr Sharon again stressed that he wanted Palestinian leader Yasser Arafat removed from any position of influence.
Israel has a general election scheduled for 28 January, when Mr Sharon's Likud will be challenged by Labour, whose leader Amram Mitzna favours immediate talks with the Palestinians.
Mr Sharon has adopted a hard line, demanding a full cessation of violence before any moves towards peace with the Palestinians.
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