The government first proposed a six per cent rise, which it later pushed up to 7.25 per cent.
Unions initially demanded a 12 per cent salary rise, but have lowered their target to 10 per cent.
"Labour is definitely negotiating starring at the barrel of a gun, and that is something we do not take kindly to"
Tahir Mohammed, chief negotiator for the unions
Cosatu's president expressed disappointment with the latest offer.
"They [the government] are coming with guns on our head and that is a problem," Willie Madisha said.
"You cannot come back with a revised offer early this morning and give us an ultimatum to take it or leave it in such a short period of time."
Other union leaders said the negotiations appeared to have reached a dead end.
"We have reached the end of negotiations and I cannot see any movement beyond this evening," Chris Klopper of the Suid-Afrikaanse Onderwysers Unie said after talks ended at 2am (0000 GMT) on Wednesday.
Tahir Mohammed, chief negotiator for the unions, said any constructive dialogue between the government and unions looked to be over.
"Labour is definitely negotiating starring at the barrel of a gun, and that is something we do not take kindly to," he said.
Union negotiators are to meet with their leaders later on Wednesday to assess the government's proposal.
The SA Democratic Teachers Union (Sadtu) has already indicated that it would reject the offer.
"If the employer does not improve the offer, we will have further disruptions of school," Don Pasquali, head of Sadtu, said.
If the unions reject the offer, it will be withdrawn and the current negotiations will end.