US Secretary of State John Kerry was Friday preparing to leave the Middle East as Palestinian leaders rejected his plan to resume the stalled peace talks.
The setback for the US plan came from the governing Revolutionary Council of Palestinian president Mahmud Abbas's own Fatah movement, which demanded changes.
The broader Palestine Liberation Organisation, which also includes leftwing factions less sympathetic towards a compromise, said it was also drawing up a formal response to Kerry's proposals.
Palestinian member of parliament Mustafa Barghuti said "most factions" within the PLO had rejected Kerry's proposal.
"It is appropriate and encouraging that there is such a serious debate about these issues," a senior State Department official said in a statement in the early hours of Friday morning.
While Washington understood that "there are many strongly held views and appreciate efforts to find a basis to move forward," the top US diplomat would go ahead with plans to leave on Friday.
"During the leadership meeting... most of the Palestinian factions... rejected restarting peace talks based on Kerry's proposals," Barghuti said.
PLO executive committee member Wasel Abu Yusef said the Palestinian leadership had "decided to form a committee to respond to Kerry's proposals."
"Kerry did not present guarantees to stop settlement building, nor base (peace talks) on 1967 borders," he said.
Kerry's plan would have seen Israel, now ruled by a coalition that has tilted sharply to the right after elections early this year, make only a tacit commitment to slow settlement construction in the occupied territories, not the publicly announced freeze long demanded by Abbas.
On Wednesday, the US envoy had expressed cautious optimism that he was making progress towards a deal to restart talks after his proposals were endorsed by Arab League chief Nabil al-Arabi and senior Gulf Arab diplomats.
But even he had acknowledged that there were still differences over "the language" governing any resumption of talks.
A senior Fatah official said the party wanted changes to what Abbas had agreed.
"Fatah wants to make some alterations to Kerry's plan... because the proposed ideas are not encouraging for a return to negotiations," said the official, speaking on condition of anonymity.
The announcement came after two rounds of intensive talks between Kerry and Abbas, who is also Fatah leader.
Signup to our newsletter and follow us on Facebook and Twitter!
It was the top US diplomat's sixth visit to the region since he took office in February, to try to broker a compromise to allow a resumption of direct peace talks that have been frozen by Israel's refusal to agree to a new suspension of settlement expansion in the occupied West Bank.
Israel had rejected Palestinian demands for a publicly stated freeze to all settlement construction in the occupied territories as a condition for resuming talks, and Abbas and his negotiating team had referred the idea to his party leadership.
US President Barack Obama on Thursday urged Israeli Prime Minister Benjamin Netanyahu to resume negotiations with the Palestinians "as soon as possible," the White House said.
"The president encouraged Prime Minister Netanyahu to continue to work with Secretary Kerry to resume negotiations with the Palestinians as soon as possible," the White House said in a statement, after the two leaders spoke by telephone.
The US State Department had earlier acknowledged Kerry was unlikely to be able to announce a breakthrough.
"There are currently no plans for an announcement on the resumption of negotiations," said State Department spokeswoman Jen Psaki.
Kerry on Wednesday had been hopeful of progress.
"Through hard and deliberate, patient work, and most importantly through quiet work, we have been able to narrow those gaps very significantly," he told reporters.
"We continue to get closer and I continue to be hopeful that the two sides will come to sit at the same table."
Kerry's latest peace bid came against the backdrop of Israeli anger at new European Union guidelines for its 28 member states that will block all funding of, or dealings with, Jewish settlements in the occupied West Bank, including annexed east Jerusalem.
Netanyahu on Wednesday called Kerry and warned the EU was "damaging efforts to restart the talks".
The EU office in Israel said on Thursday that Kerry, Israeli President Shimon Peres and Netanyahu all called European Commission chief Jose Manuel Barroso on Wednesday night to discuss the guidelines.
It said that the EU is ready to negotiate with Israel regarding their planned entry into force from January 1 next year.
Kerry's talks also came as two rockets fired from the Hamas-controlled Gaza Strip hit Israel without causing any casualties or damage, police said.
Hamas strongly opposes renewed peace talks between Abbas and Israel, warning that they would pose a new obstacle to reconciliation.