A draft report from the U.N. Security Council says members cannot reach a decision on whether to admit the Palestinian territories as a member state.
The report by the Security Council membership committee was leaked to news outlets Tuesday.
The Palestinians needed at least nine votes in the 15-member Security Council for their membership application to succeed. The United States had pledged to veto the measure if it were brought to a vote.
Palestinian President Mahmoud Abbas submitted the application for U.N. membership in September in a bid to gain Palestinian statehood recognition. The United States has been urging Palestinians to return to direct peace talks with Israel.
Tensions between Israel and the Palestinians heightened after the U.N. cultural agency, UNESCO, approved a Palestinian request for full membership.
Last week Israeli Prime Minister Benjamin Netanyahu ordered his government to freeze the country's $2-million annual funding of UNESCO. The United States has also said it will stop funding the agency.
The Israeli Cabinet has also announced it will expedite construction of Jewish settlements in East Jerusalem and the West Bank and suspend the transfer of tax revenue it collects for the Palestinian Authority.
A senior Israeli official said the moves were a punitive response to what he called recent unilateral actions by the Palestinians.
Direct peace talks between Israel and the Palestinians broke down more than one year ago after an Israeli moratorium on West Bank settlement construction expired. Palestinians oppose building on land they want as part of a future state.
Some information for this report was provided by AFP and Reuters.
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