His remarks present the most serious challenge so far to the so-called Framework Document on the future of Northern Ireland, which was expected to be agreed by the two governments next month.
The nine-strong group of Ulster Unionist MPs has played a crucial role in backing the peace process, and Mr Molyneaux has established a close relationship with John Major. But last weekend two of the group, John Taylor and David Trimble, broke ranks, highlighting fears over joint authority.
Their party leader's decision to join them leaves the peace process in crisis, potentially without significant support among the Unionists.
The Rev Ian Paisley's Democratic Unionist Party is very hostile.
In his attack on the Framework Document, Mr Molyneaux argued that the proposals would lead to at least one North-South body with executive powers. The plans, which he said were being drawn up by a "little mafia of civil servants", would be a disaster forNorthern Ireland.
Officials yesterday conceded that the comments were a significant blow to the process, but disputed some of Mr Molyneaux's claims about the document.
One Irish source added: "This is a time for steady nerves. At the end of the day, anything which is agreed can only take place with the agreement of the people of Northern Ireland."
Speaking on BBC Radio Ulster's Inside Politics, Mr Molyneaux said that under the plans being drawn up by officials from London and Dublin, a "default mechanism" would mean that any executive set up by an assembly which did not obey its masters in London and Dublin could be dismissed.
"It is joint authority in a very blatant fashion and in an unacceptable fashion - which would be objected to by all right-thinking people," he said.
Both governments should have the sense to "move very carefully and very slowly". They should go back to the drawing-board "and aim for something modest - the whole thing is becoming top-heavy".
Mr Molyneaux said that the Cabinet had not yet agreed the proposals, and warned them: "Don't do it."
Ministers have insisted that joint authority was not on the agenda for the talks between the two governments, and that joint boards - covering areas such as tourism and the environment - will have limited powers. However, it emerged that the Ulster Unionists have won a key concession from the Government amid accusations from Labour that it is seeking to "buy off" parliamentary votes.
The Ulster Unionist group has been told that the Government will depart from its normal law-making procedure this week by abandoning the use of an Order in Council to make new laws protecting disabled people apply to Northern Ireland.
The Chief Whip, Richard Ryder, overruled the Northern Ireland Office to insist that the province will feature in a section in the main Bill.
Orders in Council - which restrict the amount of time for debate and render legislation unamendable - have long held symbolic significance for Ulster Unionist MPs, who want the province to be treated like any other part of the United Kingdom.
But the Opposition believes that the Government may have made the concession to win vital Unionist support for its Disability Discrimination Bill.
Labour opposes the Government's measure because it backs a tougher Private Member's Bill, called the Civil Rights (Disabled Persons) Bill, proposed by Harry Barnes.Reuse content