Israeli officials have recently expressed interest in the proposal, adopted by the Arab League in 2002, while voicing some reservations.
The plan calls for Israel's withdrawal from land seized in 1967 in return for ties and a peace deal with Arab states.
But Saudi Foreign Minister Prince Saud al-Faisal described preconditions raised by Israel as "ludicrous".
"We only hear conditions from Israel about everything, but no acceptance," Prince Saud told reporters during a visit to Riyadh by EU foreign policy chief Javier Solana.
"This seems a ludicrous way of doing business," he said.
The Saudi plan was rejected by Israel when it was first proposed, but Israeli officials have recently suggested it may be open to discussion.
On Sunday Israeli Prime Minister Ehud Olmert said Israel was "ready to take [the plan] seriously".
Israel has previously expressed reservations over the plan's call for Israel's withdrawal from all territories captured in the 1967 Middle East war and the return of Palestinian refugees to what is now the Jewish state.
The Arab League is due to relaunch the original plan at a summit in Riyadh later this month.