In a result that US officials called disappointing, the conference produced no final document on promoting political and economic reform in the Middle East and North Africa, the goal of the meeting.
"Obviously we are not pleased," said a senior State Department official at the conclusion of the "Forum for the Future" meeting on Saturday in Bahrain's capital Manama.
Egypt gets about $2bn a year in aid from the US and while its move to block a document will not affect this money, American officials said its action was "very curious". Non-governmental organisations (NGOs) were angry, too.
"The Egyptians are always the problem with democracy ... they are the ones who spoiled the final democracy document by holding out," said Saadeddin Ibrahim, an Egyptian rights campaigner.
The Egyptian delegation was not immediately available for comment. However, a Gulf diplomat said other Arab countries too had reservations about the document and that Egypt was not alone.
The Egyptians wanted the draft document to stipulate that only NGOs which were "legally registered" by a country and followed that nation's laws should be supported.
"It would have made them (NGOs) susceptible to government influence and pressure," said the US official.
Ibrahim said the Egyptians had wanted to control the process of helping civil society by allowing only government-approved NGOs to benefit.
Rice stressed the urgency of
reforms in the Middle East
The Bahrainis, hosts of the meeting, wanted the document to be unanimous. The Americans said all the other delegations had agreed to drop the reference to NGOs, but that the Egyptians had opposed this.
US officials played down the importance of Egypt's dissent and said there had been progress in other areas, adding that the "usual rhetoric" about Israel had not dominated discussions.
Last year's inaugural forum meeting, in which the Group of Eight industrialised nations joined Middle East and North African states, pitted US calls for reform against Arab demands to solve the Israeli-Palestinian conflict as a first step to tackle terrorism.
Promoting democracy and reform across the Middle East is a focal point of US foreign policy. Many Arab nations,however, view it with suspicion.
Arab leaders have stressed the US should not try to impose its own form of democracy on the Middle East.
Foundation for the future
Bahraini Foreign Minister Sheikh Khaled bin Ahmed al-Khalifa argued that reforms should be home-grown. "Successful reform requires long-term efforts springing from the capabilities of the countries of the region and cannot be brought in," he said.
US Secretary of State Condoleezza Rice said this week's suicide bombings in the Jordanian capital Amman underlined the need for reforms across the Middle East.
"It makes even more urgent our work to have an answer to the ideologies of hatred that produce the kind of violence that we saw in Jordan"
US secretary of state
"It makes even more urgent our work to have an answer to the ideologies of hatred that produce the kind of violence that we saw in Jordan," she told delegates.
The forum announced a $100mn fund to promote business enterprise across the vast region which stretches from Morocco to Afghanistan and which will see 100 million new job-seekers in the next eight years.
The United States is providing $50mn for the fund and Egypt and Morocco have put forward $20mn each. The fund is expected to have offices in Morocco and Egypt, organisers said.
The forum also unveiled a $50mn "Foundation for the Future," aimed at promoting democracy and political reform in the Middle East and announced a conference next month in Jordan to discuss the body's structure.