Nicola Sturgeon has claimed that the draft Brexit agreement between the UK and EU would be bad for Scotland as her party pledged to oppose the deal.
Scotland’s first minister said the proposals would take Scotland out of the single market while Northern Ireland effectively stays in.
This would have a “devastating” impact on jobs and investment in Scotland, she insisted.
Mrs May has won cabinet backing for the deal after a five hour meeting.
But her Brexit deal proposals, which have not yet been published, are already facing strong opposition from senior Brexiteers and some Remain supporters.
Theresa May said there had been a “long, detailed and impassioned debate” by cabinet members on the Brexit deal.
Speaking outside Number 10, she said: “I firmly believe that the draft withdrawal agreement was the best that could be negotiated and it was for the cabinet to decide whether to move on in the talks.”
However the Democratic Unionist Party, which props up her minority Conservative government, has warned that the deal could lead to the break-up of the United Kingdom if it is accepted by MPs.
The major sticking point in the negotiations between the UK and EU has been over the Northern Ireland “backstop”, which aims to guarantee that physical checks will not be reintroduced at the border with the Irish Republic if the EU and UK fail to agree a deal on future trading relations.
The draft agreement is believed to suggest keeping the UK as a whole aligned with the EU customs union for a limited time – and there has been speculation that Northern Ireland would also retain some elements of the single market.
Sources told the BBC last month that Scottish Conservative leader Ruth Davidson, who is currently on maternity leave after the birth of her son, and Scottish Secretary David Mundell could quit their roles if a Brexit deal introduced different arrangements for Northern Ireland.
Mr Mundell, who denied at the time that he had threatened to quit, said on Tuesday it was “encouraging” that a potential agreement had been reached with the EU.
But he stressed that “we need to reflect on the detail and see what’s there and hopefully be in a position to take forward a deal.”
Before Wednesday’s cabinet meeting started, a letter from Mr Mundell and other Scottish Tory MPs was hand delivered to No 10 warning against any backsliding on fishing rights for the UK after Brexit.
Speaking to the media on Wednesday morning, Ms Sturgeon said that, from what she knows of the deal so far, it would mean “the worst of all possible worlds for Scotland”.
She added: “It would take Scotland out of the single market, which would be bad enough in and of itself.
“But it would do so while leaving us competing for investment and jobs with Northern Ireland, which would effectively be staying in the single market.
“That would be devastating for jobs and investment in Scotland and not something that anybody should be prepared to accept.”
The SNP’s leader at Westminster, Ian Blackford, has already confirmed that his party’s 35 MPs would oppose the Brexit agreement in its current form.
But Ms Sturgeon, the SNP leader, said rejecting the current proposals in the House of Commons would not make a no-deal Brexit inevitable.
Instead, she insisted it would open the possibility for getting “better options like full single market and customs union membership back on the table”.
And she said it would also allow those arguing for another referendum to be held on the Brexit terms – including the SNP – to make their case.
Ms Sturgeon added: “We must be striving for what is right for the country and my job is to strive for what is right for Scotland, not accepting bad deals.
“It is ironic is it not that the last two years the prime minister has told us no deal is better than a bad deal, and now she is arguing that we have got to accept a bad deal for fear of no deal. That is a false choice.”
Scottish Conservative chief whip Maurice Golden said the UK government and EU had negotiated a plan to avoid a hard border between Ireland and Northern Ireland.
He added: “This shouldn’t be about creating a new border between us and England.
“Nicola Sturgeon has spent months talking up the merits of the EU single market. She needs to explain why it is in Scotland’s interests to fracture the UK internal market, as she seems to want to do.
On Tuesday, Mr Blackford joined Labour leader Jeremy Corbyn, Lib Dem Sir Vince Cable and Plaid Cymru’s Liz Saville Roberts in writing to the prime minister to seek assurances that MPs would be given a “meaningful vote” on the Brexit agreement.
This would mean that amendments to be proposals can be tabled and voted on.
Their joint letter stated: “Recent interventions from government ministers have suggested that you and your government may seek to limit or constrain the process on the final vote, in an attempt to muzzle parliament.
“We want to be clear that this would be wholly unacceptable.”
What happens next?
The prime minister is continuing one-to-one briefings with her ministers on the plans ahead of a full cabinet meeting at 14:00 that is expected to last three hours.
If the cabinet signs it off, the EU Commission is expected to publish the details of the 500-page draft withdrawal agreement later, as well as the much shorter declaration on future economic and security relations.
Ambassadors from the remaining 27 EU member states will discuss the possibility of organising an emergency summit later this month, earmarked for 25 November, to sign off on it.
If this happens, the government will then face a battle to win Parliament’s backing, with some Tories vowing to vote against it and Northern Ireland’s Democratic Unionist Party – which Mrs May relies on to win key Commons votes – also expressing concern.
Mr Corbyn has said the draft agreement would leave the UK stuck in an ” indefinite half-way house without any real say” over the rules.
Dismissing what he said was a “bad deal” at Prime Minister’s Questions, the Labour leader said Mrs May was putting a “false choice” before Parliament between her “botched deal and no deal”.