The election-winning Move Forward Party (MFP) will not back the Pheu Thai Party candidate for prime minister, the MFP said on Tuesday.
The decision could complicate efforts by Pheu Thai to form a government, and prolong weeks of political deadlock.
Despite abandoning Move Forward earlier this month, second-placed Pheu Thai has been seeking its backing for real estate tycoon Srettha Thavisin to become premier.
Move Forward lawmakers were unanimous in opposing that idea.
"The formation of the government now is not reflective of the people's voice," the MFP secretary-general said after a weekly meeting of party MPs.
“It is clear that senators and other parties want to shut Move Forward down.”
Commenting on the Move Forward decision, Pheu Thai leader Dr Cholnan Srikaew said his party was not surprised but respected it.
Move Forward gave up its effort to form a coalition after leader Pita Limjaroenrat's renomination was rejected, making way for Pheu Thai, which is creating a new alliance.
The new coalition includes the third-placed Bhumjaithai Party, which was a key player in the outgoing government. Multiple reports have said that Pheu Thai is also seeking the support of the two “uncle” parties.
The “uncle” parties are Palang Pracharath led by Gen Prawit Wongsuwon, and Prime Minister Prayut Chan-o-cha's United Thai Nation.
Move Forward said in a statement posted on X (formerly Twitter) that “almost all traditional ruling parties” were being brought together to form the government. “This is contrary to the will of the people, clearly expressed on the day of the election on May 14”, when Move Forward won 151 seats and Pheu Thai 141.