US scraps Israel settlements freeze bid to revive talks
Washington had been negotiating with Israel to try to meet Palestinian conditions for restarting direct talks.
The Palestinians suspended talks in September after a 10-month freeze on Israeli building in the West Bank, excluding East Jerusalem, expired.
The US says it will continue to explore ways to bring the two sides together.
A senior US official told the BBC that attempts to get Israel to renew a partial freeze on settlement construction in occupied territory had failed.
But he said this did not meant the end of Washington's efforts to revive the peace talks, which resumed in September after a break of almost two years ago but were suspended almost immediately when Israel decided not to extend the ban on settlement building in the West Bank.
The Palestinians have said they will not return to the negotiating table while settlement building continues.
A second official said the administration had determined that the moratorium extension was not the best basis to resume talks.
Last month, the Obama administration offered Israel a sizeable package of incentives, including jet fighters and security guarantees, in return for a 90-day extension of the previous moratorium.
Israeli Prime Minister Benjamin Netanyahu offered to renew the freeze if the Palestinians recognised Israel as a Jewish state, but the Palestinian Authority dismissed the idea.
It is unclear how the US is planning to proceed, says the BBC's Kim Ghattas at the state department in Washington.
Palestinian and Israeli negotiators will be in Washington next week and Hillary Clinton will make a speech about the Middle East on Friday.
Israel has occupied the West Bank, including East Jerusalem, since 1967, settling close to 500,000 Jews in more than 100 settlements. They are considered illegal under international law, although Israel disputes this.
There are about 2.5 million Palestinians living in the West Bank.