A senior Palestinian official said a release by Israel of Arab prisoners would not go ahead on Saturday as envisaged but he hoped there would be only a short delay.
"Today the prisoners will not be released... maybe in the coming days," Issa Qaraqae, the minister of prisoner affairs, told Agence France Presse.
"There are efforts to solve the crisis and I believe that in 24 hours everything will be clearer."
State Department spokeswoman Jen Psaki said on Saturday that while "no deal has been arrived at...we continue to work intensively with both sides".
Later Saturday, U.S. special envoy Martin Indyk was to meet chief Palestinian negotiator Saeb Erakat and Israeli negotiator Yitzhak Molcho in Jerusalem, Palestinian officials said.
Around 200 Palestinians demonstrated Saturday outside Ofer prison, an Israeli facility near the West Bank city of Ramallah where many Palestinians are held, demanding the prisoners' release.
Under the deal that relaunched peace talks last July, Israel agreed to release 104 Arabs held since before the 1993 Oslo peace accords in exchange for the Palestinians not pressing their statehood claims at the United Nations.
So far, Israel has freed 78 prisoners in three batches but ministers had warned they would block the final release, which had been anticipated for Saturday, if the Palestinians refused to extend the talks beyond their April 29 deadline.
Palestinian president Mahmoud Abbas has not spelled out his terms for prolonging talks, saying only that he is not even prepared to discuss the issue until the prisoners are freed.
There has been no official Israeli update on the last batch of prisoners. The Palestinians want them to include Arab Israeli citizens, a demand hotly opposed by Prime Minister Benjamin Netanyahu's far-right coalition partners and hardliners within his own Likud party.
An Israeli official, speaking on condition of anonymity, told AFP that Israel was willing to free the prisoners but the Palestinians were placing obstacles in the way.
"Israel is interested in continuing the peace talks with the Palestinians and is prepared to carry out the fourth stage of the release of convicted terrorists," he said.
"But the Palestinians are creating difficulties with this when they say that the moment after the release of the prisoners they will stop the talks."
He did not elaborate.
Palestinian official Jibril Rajub told AFP on Friday that Israel informed the Palestinians that the last batch of prisoners would not be freed on Saturday.
Rajub said this would be a "slap in the face of the US administration and its efforts", adding that the Palestinians would resume their international diplomatic offensive against Israel as a consequence.
"Not releasing the prisoners will mark the beginning of the efforts in the international community to challenge the legality of the occupation," he said.
A poll published Saturday by the Palestinian Center for Public Opinion said 87 percent of those surveyed believed the Palestinian leadership should renew its U.N. efforts if the prisoners are not freed.
The prisoner release "is a prerequisite for any future progress of the negotiations", the center said, as the overwhelming majority of Palestinians consider it to be "the most crucial issue that must be treated in order to continue with the peace process".
The talks have been teetering on the brink of collapse, with Washington fighting an uphill battle to get the two sides to agree to a framework for continued negotiations until the end of the year.
US Secretary of State John Kerry met Abbas in Amman on Wednesday in a bid to salvage the talks, with Indyk meeting the Palestinian leader in Ramallah a day later.
Israeli media say Netanyahu could give a green light to the prisoner release if the US frees Jonathan Pollard, who was arrested in Washington in 1985 and condemned to life imprisonment for spying on the United States for Israel.
Israel is not commenting on such reports, with Netanyahu spokesman Mark Regev saying only that in general the spy's fate is "often raised at high-level meetings between Israelis and Americans".
On Wednesday, Psaki said "there are currently no plans to release Jonathan Pollard".
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