Mr Varadkar made the comment just days before a mooted Dublin meeting with DUP leader Arlene Foster and as he said the outcome of the British election means a soft Brexit is now likely.
Speaking as Foreign Affairs Minister Charlie Flanagan made similar remarks in Belfast, Mr Varadkar told a media briefing in Dublin he has concerns about the imminent linking of the Conservatives and the DUP.
Under the terms of the 1998 Belfast Agreement, commonly referred to as the Good Friday Agreement, both the Republic and Britain must act impartially in any disputes in the North.
This issue has been called into question by imminent formation of the new coalition, as the Conservatives will now be directly linked to a key party in the North.
Asked about the difficulty yesterday, British secretary of state for Northern Ireland and Conservative MP James Brokenshire said the DUP deal will not call into question the independence of his party.
However, despite the dismissal of the concern, Mr Varadkar did not rule out the need for an independent mediator to be appointed, and warned the Conservatives must not get “too close” to the DUP due to conflict of interest concerns.
“Our role as governments here in Dublin and London is to act as co-guarantors and not to be too close to any particular party,” he said.
He added it is “absolutely very important” both governments “understand their role is to be co-guarantors”.
The comment came as Mr Varadkar separately said last week’s British election result means there is “a sense” that a soft Brexit — and therefore a soft border — is now possible.
Saying “the landscape has changed”, Mr Varadkar said the fact the DUP and Scottish Conservatives — which together control 23 seats in Westminster — hold similar views means “there is an opportunity to soften Brexit”.
The claim was repeated by Mr Flanagan, who told reporters after meeting with all Northern Irish parties in Belfast yesterday in a bid to kick-start the separate Stormont government talks that the Conservatives have “rigorous impartiality” and act within the spirit and letter of the Good Friday Agreement”.
While Mr Flanagan and a spokesperson for Mr Varadkar declined to call for an independent mediator to be appointed to ensure impartiality in Northern Ireland talks, Government has not ruled out the suggestion.
However, in a separate media briefing yesterday, Mr Brokenshire dismissed the need for a mediator, a view backed on RTÉ Radio by former UUP leader David Trimble.
Mr Varadkar is likely to meet with DUP leader Arlene Foster in Dublin later this week to discuss the issue and the ongoing stand-off over the Stormont government.
Parties in the North have three weeks to agree a new government, or the North will be governed from London.