If that fails to pass the Senate, as expected, the government is satisfied it can legally conduct a voluntary postal ballot without legislation – a threat it is now imposing on the Senate crossbench.

The political spotlight will now turn to the "rebel" Liberal MPs and whether they will cross the floor to join with Labor and the crossbench to force a vote on a private member's bill drafted by Liberal senator Dean Smith.

At the meeting, most MPs argued the government should heap pressure back on Labor and the Senate crossbench, who together with the Greens blocked the plebiscite late last year.

However, Senate powerbrokers Nick Xenophon and Derryn Hinch, whose votes are crucial to any vote succeeding in the Senate, have already insisted they will not change their minds.

Finance Minister Mathias Cormann confirmed the government would "ask the Senate to reconsider" the compulsory plebiscite, which was "clearly our preference".

But "if that were to fail, the government believes we have a legal and constitutional way forward" to commission a non-legislated, voluntary postal vote, he said.

Senator Cormann said any senators who were concerned about a postal vote should reconsider their opposition to the full, legislated plebiscite.

It is understood just seven MPs spoke in favour of ditching the plebiscite policy, with four times as many speaking against, in the course of a two-hour emergency meeting to deal with the issue.

Those who argued for ditching the plebiscite were gay MPs Trent Zimmerman, Trevor Evans, Tim Wilson and Senator Smith, as well as supporters Warren Entsch, John Alexander and Jason Wood.

However, the dominant feeling among MPs was that the government should stick with the plebiscite, because it had gone to the election promising Australians a vote on same-sex marriage.

Mr Entsch told Fairfax Media he was "disappointed" by the outcome. He reserved the right to cross the floor and said he wanted a clear end-date for the issue to be resolved. 

"I want a vote a free vote on this and I reserve my rights," he said.

"This is not something I want to be perpetuated forever; there has to be a conclusion to this. I will make a decision to do what I need to do to get the outcome I want, which is marriage equality."

Opposition Leader Bill Shorten labelled the Liberals' decision "ridiculous" and said he was "disappointed for so many Australians that their prime minister has yet again let them down".

So prevalent was that view within the party room that no formal ballot was required. MPs described the mood of the meeting as "very calm" and "very civil", and Senator Cormann said it was "respectful".

The party endorsed the position advocated by the plebiscite's architect, former prime minister Tony Abbott, who told 2GB on Monday: "We've put the plebiscite up once, that's all. We should have another go. If that fails, let's have another go."

Mr Abbott spoke against ditching the plebiscite during the meeting, but also against the postal vote option, which he said would lack authority. However, it is understood most MPs who supported the plebiscite also backed the postal option.

The specifics of the reborn plebiscite, such as when it would be held, would be a matter for the joint Liberal/Nationals joint party room on Tuesday, Senator Cormann said. The bill would return to the Senate this week, he indicated.

If either form of plebiscite were to return a "yes" vote, the government would facilitate a free vote on a same-sex marriage bill, he said. But if marriage equality were rejected by the people, there would not be any vote in Parliament.

One MP who supports change told Fairfax Media: "We have a situation where if people vote 'yes', MPs will have a free vote to vote 'no'. If people vote 'no', no free vote to vote 'yes'."

Australian Marriage Equality chairman Alex Greenwich said the government had opted to retry "a failed policy". "The government does not want to do their job which is to vote through laws," he said. 

Any move to a postal vote would trigger an immediate challenge in the High Court by same-sex marriage advocates, who fear a postal vote would be stacked against success and may be legally invalid.

Anna Brown, director of legal advocacy at the Human Rights Law Centre and co-chair of the Equality Campaign, has obtained an independent legal opinion arguing the government could not fund a postal ballot without legislation.

"The legal advice we have is that such a step, conducting an AEC-administired plebiscite, would be invalid," she said on Monday. "And that's why we'd go straight to the High Court and launch the challenge."

Asked to reveal the government's own legal advice, Senator Cormann said it would be dealt with in the usual way, which is not to comment on legal advice.

- smh.com.au, with Matthew Knott