In an address to the party's Scottish conference in Dundee, he said a future Labour government could be "held back" under a deal which forced it to follow the same rules as other European Union states.
"Staying in or around the single market should be the next bold step", he said.
It will simply ask members to back a Brexit deal prioritising "working people's jobs" and " a new permanent customs union".
"The rules of the Single Market do not prevent public ownership", she said.
"Leaving the single market could cost the United Kingdom economy £45bn a year, reducing the amount of money available to governments in Westminster and Holyrood".
But he has stopped short of backing single market membership despite being urged to do so by many party members.
This is possible, but seems unlikely - apparently the last time it happened, it was over the Iraq War.
His speech was immediately criticised by Labour MEP Catherine Stihler, co-chair of the Scottish Labour for the Single Market group.
In an article for the Labour List website, Ms Stihler argued that there was "no left-wing argument for leaving the single market" as membership helped to protect workers' rights.
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He added: "The conference delegates will have a choice as to whether they support the statement drawn up and agreed upon by the executive last night or whether they prefer to support the half a dozen local Labour parties who put forward the proposition that the Scottish Labour party at this stage should pin all its colours to the mast of continued membership of the single market".
Former Scottish Labour chairman Jamie Glackin said a "healthy party" would encourage members to express their views even if they were at odds with the leadership.
Jeremy Corbyn will take to the stage in Dundee on Friday to claim Labour are in line for an extraordinary resurgence in Scotland.
Mrs May tried to heal the rift between Remainers and Leavers in her own party by admitting not everyone would get what they wanted.
He said delegates would be given a choice on whether or not to accept the executive's decision, so the single market motions could still be debated on Sunday if there was enough support.
Scotland has historically formed part of the electoral heartland of the British Labour Party, along with the north of England and the southern regions of Wales. "This is about protecting workers and consumers from the Tories, and that's why Labour must do all it can to keep the United Kingdom in the single market".
He insisted the Labour Party was not just the opposition to the Conservatives at Westminster, but was now "preparing to go into government".
"At one of the most important times for our country in its history, we have a divided government that has no clear idea of what it's doing, what it wants, or where it's going".
The Facebook group appeared to link those responsible for disseminating extreme anti-Semitism with a host of current supporters and members of Corbyn's team, as well as sitting members of the House of Lords and the Labour Party's leadership team.
"Make no mistake about it, reduced access to European markets means fewer economic opportunities for people in the UK".