However, both sides on Monday remained open to talks.
A spokesman for the Palestinian presidency, Nabil Abu Rudeina, announced the summit between Palestinian President Mahmoud Abbas and Israeli Prime Minister Ariel Sharon would be postponed until the end of October.
Abu Rudeina's announcement came after a meeting on Monday between Abbas and visiting US Assistant Secretary of State David Welsh in preparatory meetings for the summit, which was scheduled for Tuesday.
"There was not enough preparation for this summit ... to be held tomorrow," Abu Rudeina said. "So it has been postponed until the end of the month or the beginning of next month."
That would come after Abbas' 20 October talks in Washington with US President George Bush.
Abbas said the meeting with Sharon would be held after adequate preparations.
Some sources have not ruled out that the meeting could take place in the Jordanian capital, Amman, where Jordan's King Abdullah II could participate, Aljazeera learned.
In a joint statement, the two sides said they would continue meeting in committees to try to resolve the disputes.
"We regret that the summit that was planned ... will not take place tomorrow, but we hope that it will take place in the near future," Israeli Foreign Minister Silvan Shalom said at the start of a meeting with Welsh.
Meanwhile, a senior official in Abbas' office said the Palestinian leader would meet French President Jacques Chirac in Paris on 17 October to discuss the peace process.
In a related development, top Palestinian negotiator Saeb Erikat announced that Palestinian-Israeli joint committees formed after the Sharm al-Shaikh understandings would resume meetings.
Also on Monday, Aljazeera's correspondent in Gaza reported that the bodies of the three dead Palestinians shot dead on Sunday had been found near the Kisufim crossing south of Gaza.
The Israeli army earlier said that they had opened fire at Palestinian youths who tried to cross into Israel through the separation wall.
The mother (in white scarf) of one
of three slain Palestinians mourns
Palestinian sources said the three Palestinians were civilians and were unarmed.
The Abbas-Sharon summit would be the first between the two since Israel's Gaza Strip withdrawal was completed last month.
Although Israel and the Palestinians would both benefit from a summit showing progress towards peace after the Gaza pullout, Israel balked at making gestures it said would harm its security.
The Palestinians want Israel to honour its commitment to turn over four West Bank towns under Israeli military control and to free some of the more than 7000 Palestinian prisoners Israel is holding.
Israel is prepared in principle to free some prisoners but has not been specific, Palestinian Cabinet Minister Sufian Abu Zaydeh said.
"The issue of the prisoners is one of the most important issues in terms of Palestinian public opinion"
Sufian Abu Zaydeh,
Palestinian cabinet minister
"Israel is talking in general, not talking about numbers and criteria. That's not enough for the Palestinians," he said.
"The issue of the prisoners is one of the most important issues in terms of Palestinian public opinion," he added.
Abbas "would have a lot of difficulty meeting with Sharon without having convincing answers", he added.
Raanan Gissin, an official in Sharon's office, said Israel was considering releasing some prisoners involved in attacks, but the details would have to be worked out in a joint committee.
Gissin said it was unrealistic to try to wrap up years of conflict in one move.
"We're talking about a process, a very complex process, of returning back to normal," he said, adding that the Gaza pullout "has proved that the only way that you can move toward peace is piecemeal, step by step, trying to resolve issues and then moving ahead."
The postponement of the summit was the second in two weeks. A 2 October meeting was cancelled after armed Palestinian factions bombarded southern Israel with rockets and Israel launched a military offensive.
The two sides have made progress on other Palestinian demands in recent days, with a compromise possibly shaping up on reopening Gaza's border with Egypt.
Israel closed the Rafah terminal, the main link between the Gaza Strip and the world, before the withdrawal. The Palestinians say reopening the border is essential for the strip's ravaged economy.
The Karni crossing was reopened
Israel reopened a cargo crossing on its border with Gaza on Sunday, and Palestinians said this would alleviate a shortage of fruit and dairy products in the territory.
The Karni passage and others with the Palestinian area had been closed almost continuously since 24 September after Gaza resistance groups fired dozens of rockets into Israel.