Malaysia says it will abandon the construction of a controversial bridge to Singapore.
The prime minister said the government had decided not to proceed with the project, on which it began work in January without Singapore's agreement.
Malaysia also suggested the move would mean related potential deals, including one on Singapore's access to Malaysian air space, would be put on hold.
The bridge has been a major source of tension between the two countries.
Malaysia wanted to replace an ageing 1km- (0.66 mile-) long causeway between the two countries with a modern bridge, allowing ships to pass underneath it.
Malaysia said this would ease congestion on the causeway, and in January said it would begin building its half of the bridge.
But Singapore said it was concerned about the cost of the project and the impact on the environment.
Singapore has suggested that a decision on the bridge issue should be part of a package deal on unresolved bilateral issues.
Singapore has requested military access to Malaysia's airspace, something Prime Minister Abdullah Badawi says ordinary Malaysians have opposed. The sale of sand to Singapore for a land reclamation project has also been under discussion.
But Mr Badawi said in a statement that "all negotiations relating to the bridge" would now be halted.
He said the decision was made taking into consideration "the voice and sentiment of the people, particularly over sand and airspace".
The Singaporean Foreign Ministry issued a one-line response to the move.
"We are surprised at this sudden decision when negotiations for a full bridge were still ongoing," it said.
The move by Malaysia is likely to strain ties, analysts say, leaving the two neighbours in a stalemate over long-standing disputes.