President Hugo Chavez dared the US government to expel his ambassador from Washington in response to Venezuela's rejection of the White House's choice for ambassador in Caracas.
Mr Chavez reiterated that he will not allow the US diplomat Larry Palmer to be ambassador, and said: "If the government is going to expel our ambassador there, let them do it!"
He added: "If they're going to cut diplomatic relations, let them do it!"
The US State Department has said it stands behind its nomination of Mr Palmer, who is awaiting Senate confirmation.
Mr Palmer angered Mr Chavez by suggesting during the confirmation process that morale is low in Venezuela's military and that he is concerned Colombian rebels are finding refuge in Venezuela.
State Department spokesman PJ Crowley said last week that Venezuela's decision not to accept Mr Palmer - after initially giving its approval - will have consequences on relations with Venezuela, and that the US government will evaluate what to do.
The State Department has also been strongly critical of decree powers granted to Mr Chavez by his congressional allies this month, a manoeuvre Mr Crowley described as one more way for the leftist president to "justify autocratic powers".
"Now the US government is threatening us that they're going to take reprisals. Well, let them do whatever they want, but that man will not come," Mr Chavez said in a televised speech.
There was no immediate reaction from the US Embassy in Caracas, which has been without an ambassador since Patrick Duddy finished his assignment and left in July.