Acting Prime Minister Wayne Swan wrote to Mr Abbott on Thursday outlining plans to reopen an asylum seeker processing centre on Nauru - a key part of the opposition's immigrationpolicy - in return for support on Malaysia.
But Mr Abbott dismissed the idea.
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"The Malaysia deal is a bad deal," he told the ABC.
"It was a bad deal six months ago, it's a bad deal today and it will be a bad deal tomorrow and the day after."
Immigration Minister Chris Bowen said on Thursday the government is willing to work with Nauru to reopen a detention centre there, while still pushing for its Malaysia Solution.
Mr Bowen announced the move in Newcastle today following earlier reports Labor was prepared to adopt Nauru, used by the Howard government for processing under its Pacific Solution.
The announcement comes after the government said all options were on the table for discussion if the coalition was prepared to support its Malaysia people swap deal.
Opposition Leader Tony Abbott had rejected an offer for his immigration spokesman Scott Morrison to thrash out a deal with Mr Bowen.
Instead he urged Prime Minister Julia Gillard to return from her holidays to discuss the issue following the death of as many as 200 asylum seekers in East Java on the weekend.
The government ceded to calls from Mr Abbott to provide a written proposal, which included seeking to reopen the centre.
Labor has previously argued that Nauru won't work as a deterrent because most people processed there ended up in Australia or New Zealand anyway.
The Coalition has steadfastly refused to support the Malaysia deal because Kuala Lumpur hasn't signed the UN refugee convention.
Mr Bowen said the government would continue to push for its Malaysia solution and it was vital the Coalition was compared to compromise as well.
