At the weekend, Merkel proposed a "flexible system with division of labour" which could see countries that refuse to take in refugees compensate by making contributions in other areas.
"We don't want to compensate, why should we compensate with a contribution?" Babis said in an interview with the daily Frankfurter Allgemeine Zeitung.
"We have said clearly: it is our people, our businesses who will decide who will work and live with us."
Under a scheme introduced in 2015, asylum seekers from the frontline states of Greece and Italy were to be moved to other EU countries under a quota system, but Hungary, Poland and the Czech Republic have refused to take almost any.
Merkel's proposal for a "flexible" system could see countries that refuse to take refugees instead provide financial aid to those on the front line.
But Babis, a billionaire whose populist party performed well in elections last year but has failed to form a coalition government, rejected this approach.
"We must stop this migration across the European continent and help these people in Africa and Syria," he said.
Merkel also said that the European border police force Frontex should be allowed to operate independently -- an idea again rebuffed by Babis.
"The idea that Frontex will guard everything by itself is not realistic in the long term," Babis said, adding that individual states should be allowed to protect their frontiers.
Europe has been coping with its worst migration crisis since World War II, but has sharply cut numbers since its 2015 peak when 1.2 million arrived in the block.
EU leaders in December set an end-of-June deadline for an overhaul of the so-called Dublin rules to create a permanent mechanism to deal with migrants in the event of a new emergency.
Under existing rules, countries where migrants first arrive are required to process asylum requests. Italy, Greece and Spain are the main entry points to Europe.
More than one million asylum seekers, with Syrians making up the biggest group, have arrived in Germany since 2015, creating deep new political divisions in the country and shrinking Merkel's ruling majority in her fourth term.
In the weekend interview, Merkel said she thought it likely that it "will take several more weeks" to seal a deal, without excluding one at the summit.
"I hope that with great flexibility we will be able to overcome the current deadlock on asylum policy," she said.