Algerian Foreign Minister Abd al-Aziz Bilkhadim said on Monday the much-awaited five-nation Arab Maghreb Union (AMU) summit, the first to be held since 1994, was postponed at the formal request of Libya.
A senior Arab diplomat earlier told Reuters the summit had been indefinitely shelved due to the long-running dispute between neighbours Algeria and Morocco over the mineral-rich territory of Western Sahara.
Libyan leader Muammar al-Qadhafi had been due to attend the meeting, aimed at creating a free trade zone, after promising to abandon a weapons of mass destruction programme.
The AMU is made up of Algeria, Libya, Mauritania, Morocco and Tunisia who together have 80 million people. It was set up in 1989 to mirror the European Union, but never took off because of a rift between neighbours Algeria and Morocco.
The union plunged into crisis on Sunday when Morocco said King Muhammad would not attend.
Morocco's official news agency MAP said the presidency of the AMU had been transferred to Libya from Algeria.
No date was given for the next summit, but diplomats said they doubted the Union could survive following the latest postponement.
The EU and United States have been pushing the North African countries to settle their various differences after the 11 September 2001 attacks on New York and Washington.