The about-turn puts on hold US efforts to bring together Israel and the Palestinians in so-called proximity talks. The proposed talks, the Palestinian chief negotiator said this week, were a "last chance" to keep the Middle East peace process alive.

The decision came after Israel announced on Tuesday it would erect 1,600 settler homes in an area of the occupied West Bank it annexed to Jerusalem. Abbas had only agreed to the talks on condition that Israel imposed a Jewish settlement freeze.

Israel also this week 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.

Arab League delegates said the resumption of the talks hinged on Israel halting settlement expansion in East Jerusalem and occupied territories.