The move was started by Queensland Nationals Leader, Lawrence Springborg, in an attempt to build a combined opposition to Premier, Peter Beattie.
But the Prime Minister, John Hoard, has ruled out any new party being formed as part of a Coalition merger.
He says if the two conservative parties are to merge, the Nationals will have to become Liberals.
Mr Howard has told the ABC the Coalition arrangement has worked well at a federal level for the past 10 years.
“Now speaking for myself as leader of the Liberal party throughout the country, I am totally opposed to anything that would alter the existing identity of the Liberal party. I am opposed to any new name for the Liberal party in Queensland. I don't want old Liberals or new Liberals, I just want the Liberal party of Australia operating throughout the country,” Mr Howard said.
The Liberals' Queensland senator George Brandis says his party needs a merger with the Nationals like a "hole in the head".
"This has started to cause not unity but division, dispute and grief in the National Party as no doubt it will in the Liberal Party," Senator Brandis told reporters. "We need this like a hole in the head."
However Queensland MP Warren Entsch said the sooner a merger between the Liberals and Nationals occurred the better. "The sooner they can get together the better it will be," Mr Entsch told reporters.
"I don't have any issues with it at all. I think that we have far more in common, let's work on the commonality." Mr Entsch said that at the end of the day you have got to stop and think about what was best for the people of Queensland.
Queensland's Labor Premier, Peter Beattie, has welcomed the merger moves.
“I congratulate both of them. I think it is a fantastic achievement and I wish them well. What you have got of course is the National Party parliamentary party looking after itself because they will end up leading the Liberal party. But out in the bush [regions] what you will get is that the Liberal party has given up the ghost,” Mr Beattie said.