Leaders from across the political and ideological spectrum said they opposed the suggestion, which calls for normalisation before ending the Israeli occupation of the West Bank, Gaza Strip, East Jerusalem and Syria's Golan Heights.
The proposal is due to be presented to the Arab League summit in Algeria on Monday.
"This would be a very grave concession," Sakhr Habash, a member of the Fatah central committee, said.
"How could any Arab or Muslim leader embark on such a thing while Israel is still occupying our homeland and refusing to recognise our legitimate rights?" he said.
Speaking to Aljazeera.net on Saturday, Habash said any concessions to Israeli Prime Minister Ariel Sharon would only make him want more.
He described the Jordanian proposal as "amounting to a submission to Sharon's designs and American dictates".
Habash, a former adviser to the late Palestinian leader Yasir Arafat, criticised Arab officials who use Palestinian contacts with Israel as a pretext for normalising with the Jewish state.
"I know some Arab leaders would argue we cannot be more royal than the king or more Catholic than the pope. However, the Arabs should remember we are under Israeli occupation - we are actually prisoners in Israel's hands."
Another Palestinian leader, Azmi Shuaibi, accused the Jordanian government of compromising the Arab stance towards Israel since 1967.
"I hope our Jordanian brothers will not break the long-standing Arab consensus vis-à-vis UN resolutions 242 and 338 and the principle of land for peace.
"Even [the late Jordanian king] Husain had refused to normalise with Israel until Jordan recovered all its territories from Israel. Jordan should not ask the Palestinians or the Arabs to do something that King Husain had refused to do."
Shuaibi suggested the Jordanian proposal was an expression of the "constant retreat of Arab officialdom since the 9/11 events in the United States".
Hamas: Unacceptable step
The Palestinian resistance group Hamas also denounced the Jordanian proposal, calling it "harmful and injurious to the feeling of every Palestinian man, woman and child".
"This is a very harmful proposal, it is totally unacceptable," said Hasan Yusuf, Hamas spokesman in the West Bank. "How can our Arab brothers normalise relations with Israel while Israel is occupying our land, judaizing Jerusalem, and keeping more than 7000 Palestinian and Arab political and resistance prisoners behind bars?"
Hamas says the proposal would
insult all Palestinians
He told Aljazeera.net that normalisation with Israel under the present circumstances would amount to "a clear betrayal of Palestine and its struggling people".
"If we lost the normalisation card, what other cards would we still have to make Israel come to terms with Palestinian and Arab rights?"
Palestinian officials refused to comment on the Jordanian proposal.
On Friday, Jordanian Foreign Minister Hani al-Mulki denied reports that the Jordanian proposal was inconsistent with the united Arab stance on peace with Israel as expressed in the Arab summit in Beirut in 2002.
This month, Jordanian King Abd Allah said the Algerian summit should amend the Saudi Arabian initiative and take Israel's fears into account in order to get it to make concessions.
King Abd Allah (C) is accused of
trying to appease the US
The Saudi plan offers peace with Israel for the return of the Arab territories Israel seized in 1967 in accordance with UN resolutions 242 and 338.
The plan also calls for the creation of a Palestinian state and a just resolution for the enduring issue of Palestinian refugees, expelled from their homes and towns when Israel was established in 1948.
"We were surprised that after the Beirut summit, the plan had no effect on Israeli society," Abd Allah told French Channel II in a 7 March interview. "We might have to explain it in a better way."
Abd Allah added: "The real price is Israel's getting peace from the Arab states from Morocco to Oman on the Indian Ocean. Should we understand the fears of others, problems might be settled."