The Social Democrats met with Fine Gael for exploratory talks on housing, climate and disability as the Labour Party said it has withdrawn from government formation talks with Fianna Fáil and Fine Gael.
The Soc Dems said that its parliamentary party will meet again after Christmas to decide on the next steps.
Meanwhile, Labour said its decision to end talks was taken at a meeting of its parliamentary party today.
Leader Ivana Bacik said the policy gulf between her party and the larger two parties was too large, especially on "Labour's vision of an active state that is funded properly".
She cited the party's plan for a State construction company as an issue and she said Fianna Fáil was particularly sceptical of that idea.
Ms Bacik said: "There is a gulf, a divide in our vision of what the future can be, of the future for the State. In particular, on our Labour vision that we articulated throughout the election campaign, that vision is for an active state that is funded properly and is not built on a narrowing tax base."
She added that the direction of travel in terms of government formation was also made clear when it emerged that Fianna Fáil and Fine Gael would support the candidacy of Regional Independent Group member Verona Murphy for the position of Ceann Comhairle.
Ms Bacik said that the fact that the two larger parties were only two votes short of a majority always meant that smaller parties would have limited leverage in ensuring their policies would be realised in a coalition.
She added that the gap had narrowed further with the election of Ms Murphy as Ceann Comhairle.
Asked why the party had not made the call two weeks ago, Ms Bacik said Labour was never content to just sit on the sidelines and did want to see its policies realised.
She said the party did want to give the process due diligence and she has now informed the leaders of both parties of Labour's decision.
Labour's Louth TD Ged Nash said the decision to pull out of exploratory talks was made unanimously by the parliamentary party.
Labour negotiations a 'fool's errand' - Boyd Barrett
People Before Profit leader Richard Boyd Barrett, meanwhile, described Labour's negotiations with Fianna Fáil and Fine Gael as a "fool's errand".
He said that parties on the left should have come together to form an alliance before the election was called.
Mr Boyd Barrett told RTÉ's Drivetime: "It has been a fool's errand trying to negotiate with Fianna Fáil and Fine Gael.
"We have been the ones who have said consistently that we would lead the parties on the left, or who see themselves on the left should form an alliance. They should have formed it long before the General Election.
"They should have made clear that they were going to offer an alternative to Fianna Fáil and Fine Gael and not waste their time. Leaving open the option of discussion with Fianna Fáil and Fine Gael, if you’re offering change, why would you negotiate with the people who represent the status quo?"
