Gantz's remark came on Wednesday after President Reuven Rivlin tasked Netanyahu with trying to assemble the next government, Xinhua news agency reported.
Gantz, Israel's former military chief, said in a statement that his centrist Blue and White party is "committed" to the idea of unity but will not join forces with a leader who might face serious corruption charges, referring to Netanyahu's involvement in several corruption cases. The attorney-general has said he intends to indict Netanyahu.
Gantz said that during two days of talks on a possible unity government, brokered by President Reuven Rivlin, the Likud representatives said that any future government should include the pro-settler party of Yemina and two ultra-Orthodox parties.
"This composition would not allow a wide government under my leadership that will work for the benefit of the entire citizens of Israel," Gantz said.
Rivlin tasked Netanyahu with forming the country's 36th government, following the deadlocked Sept. 17 election that yielded inconclusive results.
Both Likud and Blue and White did not win enough votes to form a government.
Rivlin said his decision followed a two-day-long official consultations process, during which 55 lawmakers said they supported Netanyahu as the next prime minister and agreed to join a governing coalition under his leadership.
Gantz had 54 lawmakers recommending him but 10 of them, lawmakers with the Arab-Jewish Joint List, said they will not join a possible governing coalition under Gantz.
Netanyahu said he accepted the appointment and called for a "wide unity government" under his leadership.
( With inputs from IANS )