"It is a bad step and a reward for terrorism," Lapid wrote on social media platform X.
"A functioning Israeli government could have prevented this. Through smart and serious work, through professional diplomatic dialogue, through proper advocacy."
Lapid, whose Yesh Atid party sits in the political middle ground, also accused Prime Minister Benjamin Netanyahu's religious-nationalist government of presiding over both a "security disaster" and "diplomatic crisis".
"The government that brought upon us the gravest security disaster in our history is now delivering the worst diplomatic crisis ever," he wrote, referring to the Hamas assault of October 7, 2023, in which militants killed about 1200 people and abducted about 250 others.
The families of Israeli hostages still held in the Gaza Strip also criticised the recognition of a Palestinian state, saying it turns "a blind eye" to the 48 people remaining in Hamas captivity.
"As families who deeply want peace in the region, we believe that any discussion about recognising a Palestinian state must be contingent upon the immediate release of all hostages," the Hostages and Missing Families Forum said in a statement.
"Offering such significant political rewards without securing the return of all 48 of our loved ones represents a catastrophic failure of political, moral and diplomatic leadership that will severely damage efforts to bring them all home," it said.
The relatives of the hostages, who have been held in the Gaza Strip for nearly two years, called "on all nations to act responsibly and ensure that any 'day after' discussions occur only after our loved ones are brought home".
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