Silvio Berlusconi said he could call off his re-election bid if Prime Minister Mario Monti decided to run as the leader of a centre-right coalition.
"If Monti runs for leader, I would take a step back," Berlusconi said on Wednesday, a day after he criticised his successor for failing to revive the Italian economy and for being "too German-centric".
"I think it would be a great benefit for the country if professor Monti becomes the next prime minister as leader of a moderate movement," he said.
Berlusconi said he could also be a co-ordinator of a broad centre-right coalition without being its candidate, or choose to go for some "well-deserved rest".
There is growing speculation in the Italian media that Monti, a former high-flying European commissioner, could run in the elections, but the 69-year-old economist has so far declined to comment.
Billionaire Berlusconi added: "At the moment I am a candidate for Palazzo Chigi" - the prime minister's residence.
The three-time prime minister then said the current secretary of his People of Freedom (PDL) party, Angelino Alfano, could be a possible candidate instead.
"I was pushed by my supporters to be the candidate. I did not put myself forward," Berlusconi said. "I do not at all exclude" Alfano's candidacy, the 76-year-old said, adding: "It is absolutely possible that he will be the prime minister."
Berlusconi's comments surprised political observers, since he and Monti have been trading criticisms of each other's government records.
Riccardo Barenghi, a columnist for La Stampa daily, dismissed Berlusconi's offer to stand aside as "a joke".
"It's clear that the candidate from the centre-right is still Silvio Berlusconi. He's back in full form," Barenghi said.
Berlusconi's party withdrew its support for Monti's unelected, technocratic government in parliament last week, prompting the prime minister to announce that he will resign as soon as next year's budget is approved in the coming days.
Berlusconi officially launched his campaign for a new term as premier on Saturday, saying: "I am running to win."
Monti replaced Berlusconi in November last year after the tycoon was forced out by a parliamentary revolt, a wave of panic on the financial markets and a series of damaging sex scandals.
Monti is credited with dragging Italy back from the brink of bankruptcy by keeping a lid on public finances, launching economic reforms and restoring Italy's credibility abroad.
But unemployment has risen to record highs and austerity has hit the middle class hard.
Monti said Berlusconi had resigned "leaving a lot left to be done", adding: "That is why whoever wins the elections will have to try and continue reforms."