Aides close to the Palestinian President said on Thursday that Quraya told Arafat that he did not want to be prime minister any more.
Palestinian officials said Arafat wanted to dismiss Interior Minister Nasir Yusuf, in charge of security and that Quraya opposed the move.
Earlier, a Palestinian parliament session where Quraya was to outline his programme of government was delayed indefinitely.
"Because of differences in opinion about the government, it has been decided to postpone the session indefinitely," acting speaker Ibrahim Abu al-Naja told deputies.
The deputies had earlier been locked in closed-door talks about whether Quraya and his eight ministers needed a formal vote of approval.
Quraya was appointed in a presidential decree by Palestinian President Yasir Arafat that also ushered in emergency rule for the occupied West Bank and Gaza Strip.
Independent MP Hanan Ashrawi had earlier said that there was a division over whether a vote of confidence was needed.
"There are two schools of thought," she said.
"First, this cabinet is part of the state of emergency and so
therefore no vote of confidence is needed. But others do not approve of the state of emergency and believe it should be a regular government" which requires parliamentary approval, she said.
Members of parliament felt the government had been imposed on them.
Palestinian MPs were uneasy over
declaration of emergency cabinet
Kadura Faris, an MP for Arafat’s Fatah movement, had said while the law allowed for emergency rule, the current conditions did not necessitate such a government.
“There has been a great deal of opposition among Fatah and PLC members against the forming of the emergency government and we are now waiting to have an ordinary rather than emergency government,” he said
Arafat announced the imposition of emergency law in the wake of a resistance attack in the northern Israeli city of Haifa which left 19 people dead, including the female bomber. Islamic Jihad claimed responsibility for the blast.
Following the explosion, there were renewed Israeli demands to “remove” the Palestinian president.
Parliament was expected to use Thursday’s meeting to vote on the next leader of the PLC, after Quraya stepped down to take up the premiership, said a deputy.