Netanyahu's cabinet voted Sunday to back out of the hard-won deal, provoking a flood of criticism and warnings it could damage Israel's relationship with the United States' influential Jewish community.
That followed pressure from ultra-Orthodox Jewish parties who are part of Netanyahu's right-wing coalition and follow a strict interpretation of religious rules.
Such parties have often played a kingmaker role in Israeli politics and have opposed years of efforts by more liberal Jews to win equal rights for women at the Western Wall, one of the holiest sites in Judaism.
A compromise reached more than a year ago and hailed as "historic" at the time would have created a third space near the wall, open to both women and men.
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Sunday's cabinet vote froze the deal -- effectively cancelling it -- despite the government having earlier endorsed it.
In a sign of the tensions the decision provoked, the Jewish Agency, a quasi-governmental organisation that helped mediate the deal, heavily criticised the move and cancelled an event with Netanyahu scheduled for Monday evening in response.
"Did Prime Minister Netanyahu and his ministers decide to cancel the framework because they thought it was the right thing for the people of Israel?" Lapid said on his Facebook page.
"Of course not. They did it because the only thing which motivates them is political pressure."
Netanyahu had not publicly commented on the decision, but his cabinet secretary, Tzachi Braverman, said the premier had ordered that a solution should still try to be reached through dialogue.
Ultra-Orthodox parties control 13 of the coalition's seats. Some 10 percent of Israel's population are considered ultra-Orthodox.
The Western Wall, located in Jerusalem's Old City, is venerated by Jews as a remnant of a wall supporting the Second Temple complex, which was destroyed by the Romans in 70 AD.
It is the holiest site where Jews are allowed to pray.
Israel's cabinet initially approved the mixed prayer plan in January 2016 after careful negotiations.
It was however never implemented, as ultra-Orthodox parties, under pressure from their supporters, moved to block it.
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