The hostages were being driven to the negotiating site in the Rafadh district of Shabwa province in eastern Yemen, where the abduction occurred, when the deal fell apart, according to Nasser Ba'oum, the provincial deputy governor, early on Saturday.
There was no information on when negotiations might resume or where the hostages had been taken to spend the night.
The agreement had called for Yemeni negotiators to exchange themselves, according to Shaikh Awadh Bin al-Wazir, a member of parliament and a member of the negotiating team. After the deal fell through, he could not be reached for comment.
Al-Wazir had said the exchange was expected on Friday night.
The tribesmen, who abducted Juergen Chrobog, his wife and their three children as they toured the mountains of eastern Yemen on Wednesday, demanded the release of five members of their al-Abdullah bin Dahha clan who are in jail awaiting trial for the alleged murder of two members of a rival tribe in October.
Baoum said the tribal leaders were now also calling for the arrest of members of a rival clan.
Chrobog, 65, served as deputy foreign minister in Gerhard Schroeder's government, which left office in November. He had been German ambassador in Washington.