Calls for Britain to threaten to quit the European Union altogether unless important powers are returned to the UK reflect a hardening mood among ministers, Philip Hammond has suggested.
The Defence Secretary was responding to a report in the Mail on Sunday that Cabinet colleague Michael Gove believes Brussels should be told: "Give us back our sovereignty or we will walk out."
"The point that Michael is reflecting - and many of us feel - is that we are not satisfied with the current relationship," Mr Hammond told BBC1's Andrew Marr Show.
"The mood has changed...because for the first time in a decade, those of us who are uncomfortable with the way that relationship has developed see an opportunity to renegotiate it.
"It makes sense for Britain to be in the single market but to reset the relationship so we have a balance of competences which works for Britain and the British people."
The newspaper reported that Mr Gove, the Education Secretary and a close confidant of Prime Minister David Cameron, had told friends he would vote to quit the EU if there was an immediate in/out referendum.
And it quoted a "well-placed source" as saying: "Michael thinks it is about time we spelled it out, in simple words that even Brussels bureaucrats can understand, that we won't tolerate this any longer. We have to tell them if they don't return some of the important powers they have snaffled from us, we will leave."
Mr Cameron is opposed to an in/out poll and backs continued membership but - under intense pressure from within his party for a public vote - gave his strongest hint yet last week that there could be a referendum on a new-look relationship.
He said a referendum would be the "cleanest, simplest, neatest" way of resolving question marks over Britain's future in the organisation, but warned it would not take place before the next election.
It came as Tory backbenchers welcomed reports that the Government could confirm formally as early as Monday that it will exercise an opt-out from a raft of around 130 EU-wide crime, justice and policing policies.