Sharon also confirmed that Israel would not remove some West Bank settlement outposts, a violation of the U.S.-backed "road map" peace plan and Israel's promise not to build new settlements.
The prime minister's comments came amid Palestinian efforts to secure an agreement from militants to end attacks on Israel as part of actions to revive the road map, which envisions a Palestinian state in the West Bank and Gaza by 2005.
"I spoke in the past about the need for painful concessions," Sharon said at a news conference. "It is clear that in the future we will not be in all the places we are now."
Palestinian officials dismissed Sharon's comments, saying his actions in continuing to build settlements spoke louder than his words.
Sharon had said last week he would take "unilateral steps" to ease tensions between Israel and the Palestinians should the sides fail to reach agreement. Israeli media reported Sharon was putting together a plan that would include dismantling some West Bank and Gaza Strip settlements.
Under repeated questioning Thursday, Sharon refused to elaborate on what those unilateral steps would be.
"I don't want to go into more details," he said, saying the steps were meant to ease life for Israelis. "They will be important steps."
Sharon, a key architect of the settlement movement, appeared to hint he might evacuate Netzarim, a settlement of 60 families in the heart of the Gaza Strip.
"I don't mean to give any promises to anyone about this or that place," he said after being asked about Netzarim's fate. "We have to make a decision ... I'm not making any commitments now regarding this or that community."
Sharon's spoke hours after another official said Israel was in the final stages of legalizing new West Bank settlements, a violation of its commitments to the United States and the road map.
Sharon said some outposts are vitally important to Israel's security and will remain in place for those reasons.
"Whatever is illegal will be removed ... what is necessary will remain," he said.
The road map requires Israel to remove dozens of unauthorized West Bank outposts established since March 2001 and to freeze construction at existing settlements. Successive Israeli governments have promised the United States they would not build new settlements.
Sharon also warned Palestinians that time was running out for efforts to negotiate territorial concessions with Israel.
"They don't have an unlimited amount of time," he said. "While I'm against setting artificial time frames, at the end of the time, there is a limit to our patience."
In place of a negotiated settlement, Israel could be forced to take action on its own, Sharon said.
"The Palestinians should have understood by now that what they haven't gotten today they won't be given tomorrow," he said.
Palestinians said Sharon's actions in continued settlement building and the construction of a barrier separating much of the West Bank from Israel was destroying any chance of peace.
"I don't think you can make peace by settlements and threats," Palestinian Cabinet minister Saeb Erekat said.
Sharon also accused the Palestinian government of failing to crack down on militant groups as called for in the road map. Palestinian officials say they will not crack down on the groups for fear of starting a civil war, preferring instead to negotiate a voluntary end to attacks.
"We are not seeing even smallest step on the part of the Palestinian Authority to stop terrorism," Sharon said.
Palestinian Prime Minister Ahmed Qureia plans to meet next week in Egypt with militant groups to persuade them to end their attacks. He plans to take that agreement to Sharon to secure a cease-fire, he said.
Deputy Defense Minister Zeev Boim said Thursday that Israel was in the final stages of granting "legal" status to some West Bank outposts and had also granted a tender to expand the West Bank settlement of Negohot.
"Illegal outposts were built in the past three years, this is not a secret. I am saying that some of them are towns, that the process of legalizing them is near the end, and this is the difference," Boim told Israel Army Radio.
Erekat said Israel always intended to make the outposts permanent, and called the move an "outright violation" of the road map.
"These decisions must be revoked and there must be total cessation of settlement activities as specified in the road map," Erekat said. "They (Israel) have to choose between settlements and peace, and I hope they choose peace."
Jewish settlers have been establishing unauthorized hilltop outposts since 1998 in an attempt to establish new "facts on the ground" to prevent land-for-peace agreements with the Palestinians. They have enjoyed the quiet support of hard-line Israeli governments, which have provided soldiers to guard them. As foreign minister in 1998, Sharon urged settlers to seize hilltops.
Other outposts that are not being "legalized" will be dismantled, Boim said, adding that dozens of unauthorized outposts have been removed in the past three years. Israeli human rights groups say very few of the outposts have been dismantled, and those that have were quickly re-established.
Army Radio reported that the government was planning to remove 12 outposts, but Boim refused to confirm the number. Defense Minister Shaul Mofaz held talks with advisers Thursday about dismantling some of the unauthorized outposts.
Yediot Ahronot reported that Mofaz was expected to approve the removal of 36 outposts. The government says it has already taken down 43 outposts, a figure challenged by U.S. officials.