The leader of Greece's far-left Syriza bloc, Alexis Tsipras, has abandoned his efforts to form a governing coalition.
Mr Tsipras said he had failed to reach agreement with mainstream parties because of his insistence on rejecting austerity measures demanded by the EU and IMF as part of a bailout deal.
He made the announcement after failed talks with the Pasok and New Democracy parties, which support the bailout.
Pasok leader Evangelos Venizelos is now expected to try to form a coalition.
The BBC's Mark Lowen in Athens says there are serious doubts over whether Mr Venizelos will succeed - meaning a new election and a prolonged political crisis seem increasingly inevitable.
Financial chaos has sparked huge social unrest in Greece and led to a deep mistrust of the parties considered to be the architects of austerity.
An earlier attempt by New Democracy (ND) leader Antonis Samaras to form a coalition failed on Monday.
Following Wednesday's talks, Mr Tsipras told Syriza MPs: "We cannot make true our dream of a left-wing government."
Earlier on Wednesday, Mr Samaras rejected Mr Tsipras's demand to tear up the bailout deal.
Mr Samaras told a party meeting that the proposal would "lead to immediate internal collapse and international bankruptcy, with the inevitable exit from Europe".
"[Amending] the loan deal is one thing, it is a completely different thing to unilaterally denounce it. The second option leads to catastrophe that is certain and immediate," he said.
If it rejects the deal with the IMF and EU, Athens will be unable to draw its international loan, meaning it would again face the prospect of bankruptcy and possible exit from the euro, our correspondent says.
Previous Greek governments agreed to make deep cuts to pensions and pay, raise taxes and slash thousands of public sector jobs in return for two bailouts - worth a total of 240bn euros (£190bn; $310bn).
Both Germany and the EU have made clear they expect Athens to honour its commitments.
German Foreign Minister Guido Westerwelle said on Wednesday: "Germany would like to keep Greece in the eurozone, but Greece's fate is now in its own hands."
However eurozone governments agreed to give Greece another instalment of 5.2bn euros (£4.2bn; $6.7bn) to allow it to meet its immediate financial obligations.
The board of the European Financial Stability Facility said on Wednesday that an initial 4.2bn euros would be paid on Thursday, while the remaining 1bn euros would be paid out later "depending on the financing needs of Greece".