Labor caucus members are urging Prime Minister Julia Gillard not to adopt hardline Howard government asylum-seeker policies such as reopening a processing centre on Nauru.
The federal government is seeking legal advice but has to rethink its offshore plans after the High Court on Wednesday struck down a deal with Malaysia to swap 800 boat arrivals for 4000 UN-processed refugees.
It's expected to come under intense debate when federal cabinet meets in Brisbane on Thursday.
Immigration Minister Chris Bowen says he can't rule out reopening the Nauru centre, which was mothballed by the Rudd government to fulfil a 2007 election promise.
But many Labor caucus members are concerned the government will lose support to the Greens - and ignore their human rights obligations - if it takes a harder line.
Left faction co-conveners Doug Cameron and Stephen Jones said the government should immediately rule out using Nauru or reintroduce temporary protection visas.
"That was a naive, simplistic approach and I don't support that," Senator Cameron told ABC Radio.
"We need to ensure that there's a humanitarian approach to refugees and that's a big challenge for the government."
Mr Jones said refugees should not be used as a "political football".
He said the caucus had a "fair bit of unease" about the Malaysian deal, and there were "huge question marks" over the Nauru option.
Labor frontbencher Stephen Conroy said the government was getting legal advice about the ramifications of the High Court's decision.
"There is serious doubt about whether there is any offshore processing under this decision," he told the Nine Network.
Opposition leader Tony Abbott said procesing asylum seekers on Nauru would not pose the problems of the Malaysia deal.
Opposition immigration spokesman Scott Morrison said Nauru, unlike Malaysia, was working towards being a signatory to the United Nations refugee convention and the coalition would support its reopening.
As well, Wednesday's High Court judgment made favourable reference to Nauru, he said.
"The justices themselves ... made the point that it was very different to Malaysia and that in Nauru there were protections in place that the Australian government was actually directly providing those protections," Mr Morrison told ABC Radio.
International law expert Don Rothwell, from the Australian National University's College of Law, says only New Zealand would probably qualify as a suitable destination for asylum seekers from Australia.
"At face value it would be difficult at the moment to see how either Papua New Guinea or Nauru would immediately meet that criteria," he told ABC Television.
The way forward could be to change the Migration Act to make it easier for any government to meet the High Court's threshold tests.
Refugee lawyer David Manne, who headed the legal challenge, urged the government to get on with processing asylum seekers earmarked for transfer to Malaysia, rather than leaving them locked up in limbo.
Mr Morrison said the opposition would accept the government resettling the Malaysian refugees under the existing migration intake.
But it would not support an increase.
