"This may seem like a good idea on the surface but in reality you can't cut corners by giving the Palestinians a state, however you describe it, which does not come from an agreement with Israel," Yigal Palmor told AFP.
Later on Friday, the Palestinians will present a formal request to UN chief Ban Ki-moon for UN membership for a Palestinian state in a move which has sparked a wave of opposition from both Israel and the United States.
On Wednesday, Sarkozy proposed a compromise, urging the world body to admit Palestine as a non-member state, upgrading its status from that of an observer entity, without granting it full membership.
His address was welcomed by the Palestinians who promised that his ideas would be "studied in depth."
But Palmor said being upgraded from an observer entity to a non-member state would be equivalent to granting them recognition as a state.
"In this situation, we cannot pretend that Israel did not exist," he said.
Israeli cabinet secretary Tzvi Hauser also rejected the idea as premature.
"For Israel, the creation of a Palestinian state can only occur with the end of the conflict and the end to all claims," he told army radio in an interview from New York.
"But there is another approach, that considers the Palestinian state as a condition for starting negotiations, which would be a platform for launching other claims," he said.
"It is impossible that there would first be a Palestinian state and only from that will we be able to start negotiating."
Palestinian president Mahmud Abbas is set to present the membership request to Ban at 1535 GMT, despite massive international pressure to drop the bid.
Washington has vowed to block the Palestinian request to the Security Council for full membership in a move set to spark a diplomatic showdown, and which has set international diplomats scrambling to find a compromise.
"Each of us knows that Palestine cannot immediately obtain full and complete recognition of the status of United Nations member state," Sarkozy said in his address to the General Assembly on Wednesday, warning that a US veto "risks engendering a cycle of violence in the Middle East."
"Why not envisage offering Palestine the status of United Nations observer state? This would be an important step forward," he said.
Under UN rules, any bid for full membership requires a recommendation from the Security Council and then a two-thirds majority in the 193-member General Assembly.
But upgrading the Palestinians' status to that of a non-member state would require only a straight majority in the General Assembly where no veto is possible.
It would also allow the Palestinians to become a full member of UN agencies such as the World Health Organisation, the child welfare agency UNICEF and the UNESCO world heritage body.