Mahmoud al-Zahar, foreign minister of the Hamas-led Palestinian Authority government, left in protest at the attendance of his rival from the Fatah faction.
"I can't stand side by side with a man who is not representing the Palestinian government. He is playing a dirty game."
During his visit to Malaysia, al-Zahar reiterated Hamas's objection to a proposed referendum on whether the Palestinian government should recognise Israel.
"Nobody will recognise Israel. There is no need for a referendum," he said.
"We are not afraid of a referendum but it's a waste of time and money."
The walkout created an embarrassing diplomatic flap for host Malaysia over its decision to include al-Zahar and Farouk Kaddoumi, from the former ruling Fatah faction, at the meeting of foreign ministers and officials of 114 Non-Aligned Movement (NAM) countries.
Al-Zahar criticised the Malaysian government for inviting Kaddoumi, and said the decision was not acceptable.
The Palestinian issue took centre-stage at NAM, with the Malaysian prime minister asking the US and other Western powers to resume aid to the Palestinian Authority.
Delegates to the two-day meeting, which began on Monday, have also been urged to back Iran's right to nuclear technology.
Abdullah Ahmad Badawi, the Malaysian prime minister, used his opening speech to contrast the West's approach towards Iran with what he described as inaction over Israel's nuclear advances.
"Allowing Israel to develop nuclear weapons with impunity - which it does not deny - while others in the region are prohibited from doing so, is a blatant case of double standard," he said.
"Any rightful nuclear activity for peaceful purposes under the agency's safeguards does not constitute any concern"
Initial NAM draft
"In this matter, we must recognise Iran's right to develop such technology for peaceful purposes."
"The time for double standards is over, the time of threats to other nations is over, selective approach to humanitarian issue is over, " Mottaki told reporters on the sidelines of the meeting, after Abdullah's speech.
Manouchehr Mottaki, the Iranian foreign minister who was in Malaysia to lobby for support, restated Tehran's position that it seeks to develop a peaceful nuclear-power programme, not a nuclear weapon.
He said the world should recognise Iran's essential rights.
NAM encompasses half of the world's population and nearly 85% of its oil resources, but it is an unwieldy grouping which, critics say, has lost its way since the Cold War ended. It spends a lot of time discussing ways to remain meaningful.
Discussing a draft NAM statement on Iran at the weekend, senior officials from Singapore and Jamaica, both US allies, said some of the wording was too one-sided in favour of Iran and asked Malaysia, as chair, to redraft it, diplomatic sources said.
In the initial draft statement, NAM called for a balanced and even-handed approach, but also urged Tehran to co-operate with the International Atomic Energy Agency to resolve it.
"Any rightful nuclear activity for peaceful purposes under the agency's safeguards does not constitute any concern," the initial draft said.
NAM, born in 1961 in reaction to Cold War geopolitics, accounts for two-thirds of the United Nations.