"This is not a peace process. This is a war process that they are leading," said Steinitz.
If the Palestinian Authority (PA) continued to "sabotage" peace negotiations and lead unilateral diplomatic steps against Israel, then Israel must consider all options, including even breaking up the PA, he told Israel Radio.
Jordan, on behalf of the Palestinians, submitted the final version of the draft on Wednesday, which calls for a peace deal within one year of its adoption and an Israeli withdrawal from the occupied territories before the end of 2017.
Jordan put the draft resolution "in blue", meaning the text of the draft has been finalized and could be put to a vote 24 hours later. But the Palestinian ambassador to the UN said his country was open to continuing negotiations.
Palestinian foreign minister Riyad al-Malki earlier said the text was a French-sponsored compromise, not the draft originally phrased by the Palestinians and the Arab League.
The European Parliament gave its support on Wednesday to recognition of the Palestinian state "in principle", but said that the step should go "hand in hand" with peace talks between Israelis and Palestinians.
Although the EU legislature cannot force member states to recognise Palestine, its stance has symbolic weight.