Former prime minister Kevin Rudd fears there's about a 25 per cent chance of the United States launching a military strike against North Korea over its nuclear weapons and missile program.
The North Korean nuclear threat is among the hot-button issues world leaders are grappling with in New York for a United Nations international summit this week.
Mr Rudd outlined three possible scenarios.
He thinks it's unlikely the US would accept the reality of North Korea having intercontinental ballistic missiles, with nuclear warheads, capable of threatening US territory and the mainland.
A US military strike had about a 25 per cent possibility, Mr Rudd said.
"Certainly enough to cause me concern," he told ABC TV.
The final option was new diplomacy and a grand bargain that went to the bottom line of Chinese concerns.
"What they don't want is to see a reunited Korea, a US ally on the Chinese border," he said.
Mr Rudd said the solution lies with China, the United States, North Korea and South Korea alone.
"What you need is an arrangement that first of all gives us breathing space," he said.
"The Chinese proposal, a freeze for freeze, they say, a freeze on US military exercises with the South, in exchange for a freeze for North Korean missile and nuclear testing."
He said in the long term a grand bargain needed to look at US diplomatic recognition of the North, a peace treaty replacing this temporary armistice since 1953 and external security guarantees for the regime in Pyongyang.
On the other side of the ledger, it needed to address the cessation of the nuclear program and abolition of the existing arsenal, Mr Rudd said.
Pyongyang launched North Korea's longest-ever test flight of a ballistic missile on Saturday which flew over Japan landing in the northern Pacific Ocean after travelling 3700km.
