Gantz's Blue and White Party was supposed to sign an agreement with Likud on Monday, but he said the prime minister's party changed its mind and has walked away from the deal.
"We were ready to celebrate what had been done, but then Netanyahu and his people came with a demand to harm the proper procedures of the judicial selection committee, despite what we had already agreed on," Gantz wrote in a Facebook post Wednesday.
"We responded that we [want] to form a national emergency government, but not at any price. Joining forces at a time of crisis is important, but especially in times like these, maintaining our democracy and the rule of law is critical for the future of Israel."
Likud's judicial demands include veto rights in the appointments committee, or that decisions may only pass with support from eight of nine members. Opponents say Likud raised the demands at the last minute after they were cut out of negotiations.
Netanyahu is facing corruption charges in Israeli court, but his trial has been delayed due to the coronavirus emergency. Likud blamed the delay in signing a unity agreement on Gantz's party.
"Unfortunately at the last moment, it was Blue and White that backtracked from that agreement, which is the basis for any equal government," Netanyahu's party said. "Deceitful political spin for the press by Blue and White does not bring a unity government closer."