Business secretary Vince Cable has acknowledged the growth of Ukip as a force in British politics, saying the coalition parties need to start "engaging with them on major issues".
The Lib Dems have suffered heavily from the rise of Ukip, with leader Nigel Farage hailing his party as the "third force in British politics".
Eurosceptic Ukip came second in two by-elections last week, including in Rotherham where the Lib Dems were pushed down to eighth position – losing their deposit in the process.
"They want to be taken seriously and I think they should be taken seriously," he told BBC Radio 4.
"I certainly don't think we should be insulting the voters or indeed insulting Ukip. If they want to be taken seriously we should engage with them on the big issues".
Many Conservatives have already recognised the threat posed by the party, with Tory vice-chairman Michael Fabricant publishing a report at the end of last month proposing an 'electoral pact' between the parties.
Such a pact could include Ukip agreeing not to stand against eurosceptic Conservatives, but Farage suggested that such a deal would need a pledge by the Conservatives "written in blood" promising a referendum on leaving the EU.
He also suggested such a deal would not be possible whist David Cameron is Tory leader – and that he would prefer to work with education secretary Michael Gove, a prominent euro-sceptic.
Downing Street quickly rubbished the idea, despite Fabricant's claims that Ukip may have cost the Conservatives more than 20 seats at the last general election – effectively wiping out an overall parliamentary majority.
Opinion polls have regularly put Ukip ahead of the Lib Dems in third place, and some have predicted that they may even finish first in the European parliament elections in 2014. Those elections use proportional representation, a system far kinder to smaller parties.