The Yemeni government says it is pulling out of UN-sponsored talks in Kuwait after four months of negotiations.
The announcement comes after Houthi fighters and Ali Abdullah Saleh, the former president, said they would form a coalition administration.
The Houthis' Revolutionary Committee and Saleh's GPC party have formed a 10-member Supreme Council, which is being seen as an attempt to legitimise Houthi rule.
The group is supposed to manage all political, military, economic and administrative affairs. This would mean an end to UN-brokered talks in Kuwait which have been under way since April.
Since the talks began, the UN and Yemen President Abd Rabbu Mansour Hadi have been pushing the Houthis to withdraw from cities they hold.
Farhan Haq, spokesperson of UN chief Ban Ki-moon, said: "The unilateral decision was not in line with the peace process and endangered the substantial progress made during the Kuwait talks."
Speaking to Al Jazeera from Sanaa, Hakim Almasmari, the editor of Yemen Post, said members of both sides say they will not attend, while others say the talks - which begin in two days - will go ahead.
"I think it's part of a game to put pressure on either side," he said.
The rival sides in Yemen do not agree that the talks have made progress.
The Hadi government had demanded that Houthi fighters withdraw from areas they have taken and hand back control.
More than 6,000 people have been killed and more than 2.2 million displaced since the conflict escalated in March last year, when an Arab coalition assembled by Saudi Arabia intervened to take on Houthi fighters.
The Houthis, an Iran-allied Shia group, had called for an end to the military campaign against them. That demand, along with calls for an amnesty and prisoner releases, blocked the way forward.
For his part, Hadi said: "We have been in Kuwait for more than three months hoping that the sectarian militias would listen to the voice of reason, giving precedence to the national interest. However, we were only met with procrastination and manoeuvres."
Meanwhile, the humanitarian situation in Yemen is worsening, with the economy weakening further and governance, whether areas are in Houthi or Hadi control, crippled.
Doctors Without Borders (MSF) has warned that the country's healthcare system is failing. Even in areas where there is no fighting, people are dying owing to a lack of adequate medical care.
Abdel Hakim Aamer, a kidney patient, said: "We call on the international community and the Ministry of Health not to cut off our [dialysis] treatment. We need it. We are surviving off it. If we are cut off, many people will die. There are a lot of people in need in Yemen."
Source: Al Jazeera and agencies