Reintroducing direct rule in Northern Ireland would be an act of bad faith by the UK government, Sinn Fein has warned.
The republican party made clear it would not accept a return to Westminster rule after Northern Ireland Secretary James Brokenshire told the Commons that it was one option under consideration.
He said the Government would countenance suspending devolution if extended talks to restore powersharing in Belfast fail.
Mr Brokenshire said the intensity of negotiations needed to increase in the weeks ahead after a statutory deadline to form a new Stormont executive passed on Monday without agreement.
Under current legislation, the Government is obliged to call another Assembly election if such a deadline elapses.
Reintroducing direct rule would require emergency legislation at Westminster, as London's power to suspend was removed in the 2006 St Andrews agreement.
Sinn Fein's Stormont leader Michelle O'Neill said: "Direct rule is not an option.
"James Brokenshire has legislation, there is legislation in place that he should follow which clearly says he must call an election if there is no agreement here.
"We are working to achieve an agreement, we remain focused on that, we want these institutions to work on the basis of equality, respect and integrity. But direct rule is not an option."
Addressing MPs in Westminster, Mr Brokenshire said if there was a successful resolution he would move to amend the standing legislation to enable an administration to be formed without the need for another snap election.
However, if talks fail, he made clear the Government would also consider legislating for direct rule.
"In the absence of devolved government, it is ultimately for the United Kingdom Government to provide for political stability and good governance," he said.
"We do not want to see a return to direct rule.
"As our manifesto at the last election stated, 'local policies and local services should be determined by locally-elected politicians through locally-accountable institutions'.
"But should the talks fail in their objectives, the Government will have to consider all options."
The Democratic Unionist/Sinn Fein administration collapsed in January amid a bitter row over a botched green energy scheme.
The subsequent snap election campaign laid bare a range of other contentious issues dividing the parties.
DUP deputy leader Nigel Dodds questioned whether Sinn Fein was interested in finding a resolution to the Stormont impasse.
The North Belfast MP told the Commons: "Whilst we are determined to create the conditions for devolution and want devolution to work in partnership with Sinn Fein and others, we need a willing partner, who's willing to work realistically within the parameters of a Northern Ireland with devolved government, within the United Kingdom, within the institutions as agreed, and with Brexit a reality.
"Some of us fear that Sinn Fein have now decided that the time for devolution is over, and they're moving on to a different phase where their main ambitions lie southwards."
Earlier this month, Irish premier Enda Kenny claimed he and Prime Minister Theresa May had agreed there would be no return to direct rule.
During parliamentary exchanges following his statement, Mr Brokenshire faced repeated questions from the opposition benches on why Mrs May had not directly intervened in the process.
He rejected the characterisation she had adopted a "laissez faire" approach.
"The Prime Minister has been actively engaged in this process and will continue to do so," he said.
Asked if he would stop the salaries of Stormont MLAs if the situation drifts on, Mr Brokenshire replied: "All options are under consideration."
Without a ruling executive or agreed budget for the upcoming financial year, control of Stormont's finances will be handed to a senior civil servant on Wednesday.
Mr Brokenshire reiterated his view the situation was "not sustainable" in the long term.
He said he had spoken with the main political leaders and the Irish government since Monday and had detected a "strong willingness" to continue engaging in dialogue with a view to resolving the outstanding issues.
"But the window of opportunity is short," he stressed.
"It is essential, therefore, that the intensity of discussions is stepped up, with renewed intent and focus."
Talks to form an executive in the wake of this month's election collapsed on Sunday amid bitter recriminations between the DUP and Sinn Fein, which blamed each other for the failure.
Proposed legislation to protect Irish language speakers and new mechanisms to deal with the legacy of the Troubles remain logjams in the way of consensus.
Mr Brokenshire said if resolution cannot be attained he would, at the very minimum, legislate after the Easter recess to ensure rates bills could be issued in Northern Ireland so district councils could carry out their functions.
He said he would also "provide further assurance" around the budget position in the region.
The Secretary of State said he was determined to take forward the stalled legacy bodies.