Palestinian President Mahmoud Abbas, extending a deadline on Tuesday, gave the Hamas government another 48 hours to accept a manifesto implicitly recognising Israel or face a referendum on the issue.
Hamas, swept to power in January elections and has been locked in a power struggle with Abbas ever since. It rejects the document penned by Palestinians in Israeli jails.
Abbas had set a Tuesday deadline for Hamas to embrace the manifesto on Palestinian statehood but delayed a showdown after what officials said were appeals by Arab leaders.
A referendum, with opinion polls suggesting most Palestinians support the document, would also be seen as a confidence vote on the Hamas government, whose election led the West and Israel to cut off funds to the Palestinian Authority.
The manifesto calls for a Palestinian state on all of the West Bank and Gaza Strip, which Israel captured from Jordan and Egypt in the 1967 Middle East war.
"Abbas will within 48 hours issue the decree for holding the referendum," his spokesman, Nabil Abu Rdainah, said after the president met with the Palestine Liberation Organisation's Executive Committee.
Yasser Abed Rabo, a PLO official close to Abbas, said the president would hold a news conference by the weekend to announce a date for the vote unless Hamas changed its mind.
But despite the failure of talks late on Monday, both Abbas and Prime Minister Ismail Haniyeh, a Hamas leader, left the door open for further dialogue.
Ghazi Hamad, a spokesman for the Hamas-led cabinet, said Hamas was not looking for open-ended negotiations but did want a substantial amount of time to discuss the manifesto.
"We will not lose anything if dialogue was given another month," Hamad said. "We are discussing complicated issues, but that does not mean that we are opening dialogue for ever."
Moussa Abu Marzouk, a member of Hamas' exile leadership in Syria, said Yemeni President Ali Abdullah Saleh had offered to host negotiations between the group and Abbas's Fatah faction.
"We don't know if Fatah has accepted, but Hamas is ready to hold talks in Yemen at the highest level," Abu Marzouk told Reuters.
Hamas has largely abided by a 16-month-old cease-fire with Israel, but fighting between rival Palestinian factions has escalated in recent weeks.
In the latest inter-factional violence, three mortar bombs were fired at a Gaza compound of the Preventive Security service, which is loyal to Abbas. Two officers and four maintenance men were wounded, a spokesman for the force said.