Israel has cancelled the planned release of a fourth group of Palestinian prisoners over the Palestinian leadership's pursuit of further United Nations recognition.
Israeli Justice Minister Tzipi Livni said Palestinian actions violated the conditions for the release, which were contingent on the Palestinians refraining from making unilateral moves.
White House spokesman Jay Carney said a delay in the release of a fresh round of Palestinian prisoners "creates challenges" but that the Middle East peace process "remains open."
Israeli Foreign Minister Avigdor Lieberman's office said he will fly to the U.S. Friday for talks on the crisis, including a meeting next week with U.S. Secretary of State John Kerry.
Earlier, Kerry said the negotiations are at a "critical moment" and that it is up to Israeli and Palestinian leaders to keep the process alive.
During a visit to Algeria Thursday, Kerry said outsiders can push and nudge, but that the two sides themselves must make "fundamental decisions and compromises."
"The leaders have to lead and they have to be able to see a moment when it's there."
Kerry has spent the past few weeks trying to keep the negotiations going as the process closes in on the end of the initial nine-month period that Israeli and the Palestinians agreed to last year.
Israel Tuesday renewed a call for contractor bids on more than 700 homes in an East Jerusalem settlement.
The same day, Palestinian President Mahmoud Abbas signed more than a dozen international conventions - a move to gain the benefits of statehood outside the negotiation process.
Palestinian Foreign Minister Riad al-Malki said the action was not likely to provoke U.S. sanctions because it was limited to agencies and accords dealing with social and human rights instead of seeking full membership in U.N. bodies.
Mr. Abbas did not seek to join the International Criminal Court, a step Israel fears most because the Palestinians could use the court to contest Israel's presence in the West Bank.