He made the plea in a speech to 600 of his Social Democrats at a congress to decide whether to start coalition talks with Angela Merkel's party.
However, President Frank-Walter Steinmeier made clear that he doesn't want a new election, and Social Democrat leader Martin Schulz reversed course.
Some members - including the party's youth wing - want to specifically rule out another coalition with Merkel's Union bloc, leaving only a minority government or a new election as options. Merkel has said she is "very skeptical" about leading a minority government, which hasn't yet been tried in post-World War II Germany.
Schulz apologised for the poor result but said he could not "turn back the clock", vowing to drive a rejuvenation of the SPD so "we can do a better job".
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"There are various, equally valuable ways in which we can contribute to forming a government in this country", Schulz said.
He also called for the creation of a European finance minister, who should fight tax evasion by reining in the race to the bottom in tax policy among member states.
I want a new constitutional treaty to establish the United States of Europe.
Michael Broening of the SPD-linked Friedrich Ebert Foundation said the Social Democrats "once again find themselves in a Catch-22 situation".
Ten weeks after inconclusive elections left German politics in a stalemate, Martin Schulz urged his divided centre-left SPD to vote in favour of launching open-ended talks that could lead them to join Merkel in another "grand coalition" or tolerate a minority government.