Israel calls off planned release of Palestinian prisoners

The White House says Israel's refusal to release a group of Palestinian prisoners "creates challenges", but the US will continue to push peace efforts.

Relatives of Palestinian prisoners held in Israeli prisons hold portraits of their loved-ones as they demonstrate in the West Bank city of Ramallah on March 27, 2014 (Getty)

The United States says Israel's failure to agree to free a group of Palestinian prisoners was a new challenge for imperilled US peace efforts.

Israel's top negotiator Tzipi Livni told the Palestinians earlier on Thursday that the release of 26 prisoners could not take place because of an attempt by the government of president Mahmud Abbas to seek international recognition, a source said.

"The decision by the Israelis to delay the release of the fourth tranche of prisoners creates challenges," said White House spokesman Jay Carney.

"There certainly is currently no agreement on the release of this tranche."

Carney said, however, that Secretary of State John Kerry and the US negotiating team would not be deterred in trying to keep the peace effort alive despite recent setbacks.

"There has been progress in narrowing some of the questions that have arisen as a result of the events of the last few days," he said.

"Neither side has indicated that they want to walk away from the talks. They both indicated they want to find a way to move forward."

Israel refused to release the prisoners until the Palestinians agreed to push on with peace talks past an end-of-April deadline. But the Palestinians would not give the undertaking until the previously agreed releases took place.

In response to Israel's move, the Palestinians applied to join several international treaties and organisations in the belief that aspirations for statehood through peace talks were foundering.