The NSW Independent Commission Against Corruption on Wednesday recommended seeking advice over possible criminal charges for Mr Sidoti.
The anti-corruption watchdog investigated the now independent MP for Drummoyne over his lobbying of councillors to rezone blocks at Five Dock in Sydney, where his family owned property.
The serious corrupt conduct was found to have occurred between late 2013 and February 2017, the ICAC said.
Mr Perrottet said he had told the Drummoyne MP he should leave public office.
"I have contacted Mr Sidoti to inform him that I believe he should resign from the parliament," Mr Perrottet said in a statement on Wednesday.
"Should Mr Sidoti not resign, the NSW government will move a motion to have him suspended.
"The NSW government has also sought legal advice in relation to this matter.
"There is no place for corruption in the NSW Parliament."
In its report, the ICAC recommended seeking advice from the Director of Public Prosecutions over prosecuting Mr Sidoti for the alleged offence of misconduct in public office.
The DPP determines whether any criminal charges can be laid.
Operation Witney was helmed by Chief Commissioner Peter Hall and published its report on Wednesday.
It probed whether Mr Sidoti misused his position to try and improperly influence City of Canada Bay Council Liberal councillors to benefit his family's property interests.
It found he indulged "in a protracted course of conduct" using his position as the MP for Drummoyne "to try to improperly influence" councillors Helen McCaffrey, Mirjana Cestar and Tanveer Ahmed.
The commission found Mr Sidoti pressured and threatened councillors to try to interfere with the impartial exercise of their official functions, to further his family property interests.
Despite insisting he was acting in the interests of his constituents "the outcomes that he wanted those councillors to deliver were entirely directed to his private interest in increasing the development potential of his family's growing number of properties in and around the Five Dock town centre", the report said.
ICAC found the outcomes he was lobbying for were also inconsistent with what had been determined by the council, informed by the recommendations of staff and independent expert planning consultants "following extensive community consultation to be in the public interest".
ICAC found he engaged in a breach of public trust by "representing that he was acting at all times in the interests of his constituents and the local community".
Mr Sidoti also failed to declare his interest in family properties from the time he entered parliament in March 2011 until April 4, 2017, contrary to his obligations under the code of conduct for MPs and the ministerial code.
ICAC made 15 corruption prevention recommendations to improve the disclosure of pecuniary and private interests and the management and declaration of conflicts of interest for MPs, and "to address councillors' governance obligations, particularly in relation to lobbying, conflicts of interest and environmental planning issues".
Mr Sidoti stood aside as sports minister in 2019 after ICAC began its investigation, and later resigned from the Berejiklian cabinet in March 2021, shortly before the public hearings began.
