Israel has announced that it will not release the fourth batch of Palestinian prisoners because of renewed Palestinian efforts to join international organisations.
A spokesman for Tzipi Livni, Israel's justice minister and the government's chief negotiator, said on Thursday that the Israeli government had been working to finalise an agreement to free the prisoners when Palestinian President Mahmoud Abbas signed letters of accession to 15 international conventions.
Abbas said it was a response to Israel's failure to release prisoners as promised.
There was progress made in narrowing some of the questions that have arisen as a result of the last few days but there is still a gap and that gap will have to be closed and closed fairly soon.
Livni said the prisoner release was tied to the Palestinians avoiding unilateral moves, adding that the "new conditions were established and Israel cannot release the fourth batch of prisoners".
Israel had promised to free 104 veteran Palestinian prisoners in four tranches, and in exchange, Ramallah pledged to freeze all moves to seek membership in UN organisations until April 2014.
But a crisis erupted at the weekend when Israel refused to release the final 26 prisoners, enraging the Palestinians who on Tuesday responded by resuming their approach to international agencies.
Al Jazeera's Stefanie Dekker, reporting from Jerusalem, said: "It's almost like watching a game of ping-pong. Lipni said they [Israel] would apply sanctions if they [Palestinians] went to the UN.
"The Palestinians said, if you do that we will sue you for war crimes. The language is not conducive to talks. We have not had official confirmation that the talks are over, but things are not going well.
"We have seen peace talks come and go. All of these are just talks about talks, talking about a framework. No-one has sat down and discussed the future of Jerusalem. It is very difficult to see how this will ever be solved."
US not informed
The United States has criticised "unhelpful, unilateral actions" by both sides and Secretary of State John Kerry sought on Thursday to cast the crisis in a more hopeful light, telling reporters while visiting Algeria that the Israeli-Palestinian dialogue "remains open".
|'No peace without settlement freeze'
During the negotiators' meeting "there was progress made in narrowing some of the questions that have arisen as a result of the last few days but there is still a gap and that gap will have to be closed and closed fairly soon," Kerry said.
In Washington, State Department spokeswoman Marie Harf said that US officials "haven't been informed of any such decision" by the Israelis to call off the planned release.
The stalemate comes as Avigdor Lieberman, the Israeli foreign minister, prepares to fly to the US on Friday to meet Kerry, who earlier this week rushed to the Middle East in a surprise visit to rescue the peace talks.
Kerry has been conducting more than a year of intensive shuttle diplomacy trying to broker Israeli-Palestinian peace.