Arab League chief Amr Moussa says Palestinian President Mahmud Abbas had told him he will not enter indirect talks with Israel.
No immediate comment was available from Israeli or Palestinian officials.
Moussa was speaking after Israel announced it would erect 1,600 settler homes in an area of the occupied West Bank it annexed to Jerusalem.
Earlier, U.S. Vice President Joe Biden -- on a visit to Ramallah in the West Bank -- said the settlement plan was undermining peace efforts after Palestinians agreed to U.S.-mediated talks.
"It's incumbent on both parties to build an atmosphere of support for negotiations and not to complicate them," Biden said. "Yesterday, the decision by the Israeli government to advance planning for new housing units in East Jerusalem undermines that very trust, the trust that we need right now in order to begin as well as produce profitable negotiations. That is why I immediately condemned the action."
Earlier this week, Israel also approved construction of 112 new Jewish homes in the Beitar Ilit settlement in the occupied West Bank, on land Israel captured in a 1967 war.
compiled from agency reports