Yushchenko accused his prime minister, Yulia Tymoshenko, of wrecking the ruling coalition by joining forces with his rivals.
The pro-Western Yushchenko is hoping to steer the country of 47 million people toward NATO and EU membership.
Russia's military incursion last month into Georgia, which also aspires to membership of those two organizations, led to fears in the West that Ukraine might be also be targeted by Moscow.
Tymoshenko said the coalition had been broken up by Yushchenko himself, and her party said it was not looking to join any new grouping.
Yushchenko said in a televised statement that if a governing coalition could not be formed, "I will use my right to dismiss parliament and announce early elections."
He said Tymoshenko had joined forces with the Party of the Regions, led by former Prime Minister Viktor Yanukovych -- rival of both Yushchenko and Tymoshenko during the 2004 Orange Revolution -- and the Communist Party.
Yushchenko, Tymoshenko and Yanukovych are expected to stand in a presidential election due in about 16 months, and political analysts have seen the arguments between Tymoshenko and Yushchenko as political maneuvering ahead of that poll.
Under the constitution, the two parties have 10 days to sort out their differences. If they cannot do so, parliament has 30 days to form a new coalition. After that, the president can call a new parliamentary election.
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