A statement from negotiator Tzipi Livni sent to The Associated Press said the Palestinians' decision to seek accessions to 15 international conventions through the UN violated the terms set for the prisoners' release.
That comes as Palestinian President Mahmoud Abbas described their UN move earlier this week as a response to Israel's failure to release prisoners as promised at the end of March.
The impasse over the prisoners throws further doubts about the outcome of the US-led peace negotiations helmed by Secretary of State John Kerry.
Livni told the Palestinian negotiating team that the prisoner release was contingent on the Palestinians refraining from making unilateral moves. Livni said that "new conditions were established and Israel cannot release the fourth batch of prisoners."
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As part of the terms for returning to negotiations in late July, Abbas promised to suspend Palestinian membership applications to UN agencies and international conventions.
Israel, in turn, pledged to release 104 long-held Palestinian prisoners during the talks.
Palestinians generally view them as heroes, regardless of the reason for their imprisonment, even when their crimes have involved grisly killings.
Israelis mostly view them as terrorists because of their attacks on civilians.
There were some indications from Palestinian officials that Abbas' move largely was intended as a pressure tactic. It comes amid speculation that the US might release an American convicted of spying for Israel.
The Palestinians condemned the Israeli announcement.
Palestinian Minister of Prisoner Affairs Issa Qaraqe said that "Israel didn't fulfill the agreement sponsored by the U.S. Concerning the release ... Of prisoners in return for the Palestinian Authority not going to the U.N."
"You can facilitate, you can push, you can nudge, but the parties themselves have to make fundamental decisions and compromises," Kerry said.
"The leaders have to lead and they have to be able to see a moment when it's there.