The move puts further pressure on President Chandrika Kumaratunga and Prime Minister Ranil Wickremesinghe to bury their differences and end the political crisis engulfing the country since the president sacked three ministers and suspended parliament last week.
But the stalemate has clearly exasperated the Norwegians, who had been seeking to broker a peace deal between Colombo and the rebel Tamil Tigers.
"The resumption of peace talks is seriously impeded by the political crisis," Norwegian Deputy Foreign Minister Vidar Helgesen said on Friday.
The news that Norway was suspending its efforts to broker a peace caused Sri Lankan share prices to fall 7.00 percent on Friday.
Call for clarity
He said the stalled talks could have resumed "tomorrow" had there been "clarity on who holds political authority and responsibility on behalf of the government to ensure continuation of the ceasefire agreement and resumption of peace negotiations."
"Until such clarity is re-established, there is no space for further efforts by the Norwegian government to assist the parties," Helgesen said.
"We will go home and wait…we have no intention of abandoning the peace process, but there are limits to what we can do," the Norwegian minister said.
"We will go home and wait … we have no intention of abandoning the peace process"
Norwegian deputy foreign minister
Norway's pullout came a day after the leader of the rebel Tamil Tigers cautioned that the unresolved political feud between the president and the prime minister made it impossible to sit down and talk peace.
Though a ceasefire is still in force between government forces and the rebels who control much of the country's north, peace talks has remained stalled.
One big stumbling block for a long term solution to Sri Lanka's 20-year-old civil war is the differences between Kumaratunga and Wickremesinghe over how to achieve peace.
The president sacked the three ministers and suspended parliament, accusing the prime minister of granting the rebels too many concessions.
Wickremesinghe responded by demanding that she take over the peace process herself or reinstate the sacked ministers
Kumaratunga has also been critical of the Norwegian peace brokers.
She met Wickremesinghe earlier this week but the meeting was inconclusive. They are to meet again next week.