Netanyahu's comments follow a similar rejection by influential far-right ministers Itamar Ben-Gvir and Bezalel Smotrich, who responded to reports of the plan in The Washington Post.
The newspaper report, which cited several US and Arab diplomats, said that the United States, Israel's main ally, was working with several Arab countries on a comprehensive plan for long-term peace between Israel and the Palestinians.
The plan included a firm timeline for the establishment of a Palestinian state, the newspaper reported.
"Israel will continue to oppose unilateral recognition of a Palestinian state," Netanyahu said in a post in Hebrew on social media platform X.
"Such recognition, in the wake of the October 7 massacre, would offer an enormous reward to unprecedented terrorism and would prevent any future peace agreement," he said.
"Israel categorically rejects international diktats concerning a permanent settlement with the Palestinians," he added, saying that a peace agreement could only result from "direct negotiations without preconditions".
The Washington Post reported that the plan would begin with a ceasefire "expected to last at least six weeks", with officials hoping that an agreement could be reached before the start of the Muslim holy month of Ramadan on March 10.
The agreement would include a pause in the fighting, the release of hostages held by Hamas in Gaza since the October 7 attack, and a timetable for the eventual establishment of a Palestinian state.
"We will never agree to such a plan, which in reality says that the Palestinians deserve a reward for the terrible massacre they have committed," Smotrich wrote on X, describing a Palestinian state as "an existential threat to the State of Israel".
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