A judge told Lohan that "there's going to be jail time in this case," but that will be determined later. A new court date was set for March 10.
The 24-year-old actress is accused of stealing a $2,500 necklace from Kamofie & Co., a jewelry store in Venice.
Lohan pleaded not guilty to the charge during a court appearance on Feb. 9, but her attorney, Shawn Holley, indicated that the actress would consider a plea deal only if she could avoid jail time.
The penalty for felony grand theft ranges from 16 months to three years in a California state prison.
On Wednesday morning, Lohan arrived to a sea of cameras outside the courthouse and tough words inside the courtroom.
"I don't care that you're Lindsay Lohan versus John Doe or Jane Doe. That doesn't affect me," said Los Angeles Superior Court Judge Keith Schwartz.
Schwartz tersely told Lohan what she could expect if she pleaded guilty or no contest in the felony case.
"If you plead in front of me, if this case is resolved in front of me, you are going to jail," Schwartz said. "Period."
The "Mean Gilrs" star wore high-waisted white pants and a low-cut black top, and sat reading papers while prosecutors offered her attorney, Shawn Holley, the terms of the plea deal in a close chambers meeting with Schwartz. The details were not immediately released, but Schwartz said he didn't think Lohan would take the offer.
Lohan told the judge she understood, and left the courtroom clutching her mother's hand. She and her attorney left without speaking.
If Lohan doesn't accept the plea, the case would go to a preliminary hearing in front of a separate judge, where prosecutors would have to publicly lay out their evidence.
It was the actress' eighth court appearance in nine months.
The Associated Press contributed to this story.