Tsvangirai said on Sunday that he was willing to continue negotiating only if there was a chance of a breakthrough.
His warning follows news on Saturday that Mugabe had allocated key ministries to his own party - in defiance of the agreement with the MDC.
The power-sharing deal was signed in September, but since then the rival parties have been deadlocked over ministry posts.
Tsvangirai has reportedly argued that if the defence ministry post goes to Zanu-PF, then the home affairs post, which covers policing, must go to the MDC.
"If they [Zanu-PF] do it that way, we have no right to be part of such an arrangement," he told a rally of 8,000 supporters in Harare.
Tsvangirai said he was prepared to renegotiate the whole deal if Mugabe followed through with his stated allocation of ministries.
"The people have suffered. But if it means suffering the more in order for them to get what is at stake, then so be it," he said.
Mbeki's mediation
Thabo Mbeki, the former South African president, is expected in Harare on Monday in an attempt to break the impasse over the appointment of cabinet posts.
Under the agreement brokered by Mbeki, Mugabe remains the president while Tsvangirai takes the new post of prime minister.
But efforts to form the government have bogged down over disputes about who will control the most important ministries, such as defence, home affairs and finance.
Citing a government gazette, a list published in The Herald newspaper gave Mugabe's party 14 ministries including the portfolios of defence, home and foreign affairs and justice as well as local government and media.
Tsvangirai's MDC has been allocated 13 ministries, among them constitutional and parliamentary affairs, economic planning and investment promotion, labour and social welfare, sport, arts and culture, and science and technology development.