June 2, 2017, 9:53 a.m.
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Both parties have ruled out a formal coalition deal should the election on 8 June not produce a clear winner.
But Ms Sturgeon said she would be open to forming a "progressive alternative to a Conservative government".
Scottish Labour said Jeremy Corbyn had "absolutely 100% refuted any prospect" of any deal or pact with the SNP.
Ms Sturgeon said she was "sceptical" that such a scenario should arise in any case, with the Tories still ahead in the polls.
The Conservatives have made the prospect of a Labour-SNP "coalition of chaos" a central theme of their campaign, prompting Labour to say it would seek to form a minority government rather than a coalition if it is the largest party on 9 June.
First minister and SNP leader Ms Sturgeon was asked about the prospect of Labour trying to form a government in a hung parliament on BBC Radio Four's Today programme. She said she would "look at that on an issue-by-issue basis".
She said: "If there was to be a hung parliament, if the parliamentary arithmetic allowed it, then I would want the SNP to be part of a progressive alternative to a Conservative government.
"Not in a coalition, I don't envisage any formal coalitions, but on an issue-by-issue basis to put forward progressive policies and to see a progressive agenda."
Ms Sturgeon added that she thought such a scenario was unlikely to arise, despite a "significant narrowing" of polls elsewhere in the UK.
She said: "My reading of the polls says that Theresa May and the Tories are still on the track to win this election.
"But they are no longer certain to get a bigger majority in this election, and actually in that scenario Scotland becomes centre stage and potentially has a pivotal and decisive role to play - because it could be the case that what determines whether or not Theresa May has a bigger majority is the outcome of the election in Scotland."
Speaking on the same programme, Scottish Labour leader Kezia Dugdale said her party would not work with the SNP.
She said: "[Jeremy Corbyn] has absolutely 100% refuted any prospect of a deal, a coalition or a pact with the SNP for two fundamental reasons.
"One, he doesn't believe that the SNP are a progressive party, so you can't have a progressive alliance for a party that, for example, refuses to tax the rich and ask them to pay their fair share.
"Also Jeremy Corbyn accepts there is nothing progressive about trying to break up the United Kingdom."
Ms Dugdale added that support for Labour was "edging up" in Scotland, saying there was "tangible anger" among voters about the prospect of a second independence referendum.
Scottish Conservative leader Ruth Davidson conceded that Labour were gaining in the polls, but said the Conservatives would "hold their nerve".
She said: "At the moment we're polling in the mid-forties, which is higher than Tony Blair got in his 1997 landslide.
"It's fair to say that the Labour Party's poll has crept up, I think that's got an awful lot to do with a disastrous Liberal Democrat campaign, but here in Scotland we've already replaced Scotland as the main opposition party.
"I've been in this game for a long time. I haven't seen an election yet, and I've fought six of them as leader plus two referenda, where it hasn't been the media's job to start creating expectation about the result by saying that the polls have narrowed. Funnily enough, two weeks out, they've started that narrative and it's continuing through to polling day.
"I think that people that have the experience need to hold their nerve, put their head down and keep working, because there is no substitute in an election for hard work - knock on doors, speak to people and get your message across."
The Scottish Lib Dems have ruled out supporting either the Conservatives or Labour either in coalition or in a confidence and supply arrangement.
Leader Willie Rennie said: "We couldn't possibly with something so monumental as Brexit, with Jeremy Corbyn effectively backing up a hard Brexit of Theresa May, do a deal with either of them.
"We will do it vote by vote, we will campaign on the issues to get a better deal on Brexit, to make sure we argue for that referendum that we crucially want so the British people have the final say.
"I'm afraid on this occasion - no, we are out."