The threat by Tsvangirai, head of the Movement for Democratic Change, followed the recent arrest of MDC official Roy Bennett on treason charges, The Times of London reported.
"It has brought home the reality that as a movement we have an unreliable and unrepentant partner in the transitional government," Tsvangirai said, referring to his party's union with Mugabe and his Zimbabwe African National Union -- Patriotic Front. "Until confidence has been restored we can't continue to pretend that everything is well."
The prime minister said while his party has not officially withdrawn from the unity government, it has suspended its political cooperation.
Bennett, who was due to sworn in as the new deputy agriculture minister is due to face treason charges in High Court on Monday.
The Times said that while Tsvangirai's party has maintained its dislike of Zimbabwe's unity government, the prime minister insists the political arrangement is the best way to improve his country's future.