Viktor Yushchenko said on television "A political and constitutional coup has begun in parliament," and added "If a new coalition party is not formed within the legal deadline...then I will dismiss the Supreme Rada and call early elections."
Yushchenko's announcement comes ahead of a visit to the country on Thursday by U.S. Vice President Dick Cheney to try and drum up support for Georgian President Mikheil Saakashvili.
The latest crisis started when lawmakers from the pro-Russian opposition, the Party of Regions and the Communist Party, backed by the Yulia Tymoshenko Bloc, voted to reduce the president's powers on Wednesday amid a growing government power struggle.
The new laws, approved by 39 out of 64 party members, will come into effect in 10 days and will see the president stripped of his veto on prime ministerial candidates and simplify impeachment procedures.
Yushchenko's Our Ukraine Party officially pulled out of the ruling pro-Western coalition following the move with the Ukrainian leader saying, "The democratic majority has been betrayed. The collapse was a well planned event."
Relations between Yushchenko and Tymoshenko have become strained recently after the prime minister failed to condemn Russia's actions in the conflict in South Ossetia, and back the president in his support for Georgia.
The premier, who was accused by the president of "treason and political corruption," is widely expected to run against Yushchenko at the next presidential election. Tymoshenko has dismissed speculation that she will stand for president.
The government also failed to adopt a joint declaration on the Georgia-Russia conflict and the recent decision by Russia to recognize Georgia's breakaway regions of South Ossetia and Abkhazia as independent states.
Ukrainian lawmakers now have 30 days to form a coalition government after which the president can dissolve parliament and call snap elections.
Ukraine's pro-Russian former prime minister, Viktor Yanukovych, who has backed Russia's recognition of Georgia's rebel regions and heads the Party of Regions, said that he is not ruling out a possible coalition with the Yulia Tymoshenko Bloc.
