Lib Dem leader Tim Farron believes a “progressive” centre-left party created with anti-Jeremy Corbyn Labour MPs could be a "real possibility".
Mr Farron’s comments come as Labour MPs continue in their attempts to oust leader Jeremy Corbyn considered by some to be too left-wing.
The Lib Dem leader told the Independent he had “off-camera” conversations about a new alliance with politicians from other parties during the EU campaign and told the newspaper that progressive politicians had "rather enjoyed" each other's company.
"There are loads of people out there who you realise in this most calamitous and febrile set of circumstances you share a lot more in common with them than the fact you want to be in the European Union. So realignment is a real, real possibility," he said.
When asked if he was open to creating a new alliance or party to oppose the Conservative government, Mr Farron replied: "I think we write nothing off."
He told the paper: "My job is to defend the Liberal heritage of our movement but I think we'd be betraying the legacy of Gladstone, Grimond, Charles Kennedy and others if we were to just defend our tribal interests when we have a historic opportunity to find a polar alternative to the Conservatives, which could make the 21st century one which is a lot more progressive than the 20th was.”
He described the Tory and Labour parties as “completely and utterly false and uncomfortable coalitions” and added: “You've got the far left and the soft left of the Labour Party and in the Tory party you've got English nationalists versus pragmatists and even some liberals.
"In any other democracy in Europe those people wouldn't be in the same party as one another - and quite a few would be in the same party as us."
In an open letter to Labour, the Liberal Democrats and Plaid Cymru, the Green Party already called for a "progressive alliance" but Mr Farron argued the next steps would depend on the Labour leadership contest.
He said: "The main situation will be how members of the Labour Party relate to Liberal Democrats.
"We have to respect what's going on in the Labour Party at the moment and see what happens. My genuine sense is that I can't see a happy ending for them."
Mr Farron's comments come with Labour in crisis following the resignations of most of the shadow cabinet that led the party into the EU referendum, and after 172 MPs backed a no-confidence motion in Mr Corbyn, with just 40 supporting their leader.
