Israeli Prime Minister Ariel Sharon and his Palestinian counterpart Mahmoud Abbas have failed to secure a deal over Palestinian prisoner releases.
The talks come ahead of meetings with the US president
The meeting was described as a "shouting match" by Israel radio, with sources close to the talks saying the two prime ministers had been screaming at each other.
The two sides could not agree on how many of the thousands of Palestinians held in Israeli jails should be freed.
However, they did agree to set up a joint committee to consider the issue, which will meet on 23 July.
"The most positive thing that we agreed about was that the number of prisoners which must be released will be discussed in a joint committee," Palestinian Information Minister Nabil Amr, who attended the talks, said.
Israel sees the prisoner releases as a goodwill gesture designed to strengthen the position of the Palestinian prime minister, known as Abu Mazen, rather than an obligation under the internationally-backed peace plan - the "roadmap".
The plan has met with fierce resistance from Israeli right-wingers and it is expected that just a few hundred of the 6,000 prisoners will be freed.
Mr Sharon has said that none of those with "blood on their hands" will be eligible.
For his part Abu Mazen is pushing for a full amnesty for all of those held, saying it would be a vital boost for grassroots support for the current peace plan.
Earlier this week United Nations Middle East envoy, Terje Roed-Larsen, gave the UN Security Council an upbeat assessment of progress towards the implementation of the roadmap for peace between Israelis and Palestinians.
But he warned that both sides needed to take steps to build trust and confidence.
Abu Mazen is under extreme pressure from militant groups to secure the releases after he coaxed a three-month ceasefire agreement from them on 29 June.
Israeli sources say the list of candidates eligible for release will be finalised after Mr Sharon and Abu Mazen each hold separate meetings with US President George W Bush in upcoming days.
Sunday's talks in Jerusalem were the fourth time the pair had met since Abu Mazen took office in April.
Militant groups are pressuring for the release of all those held
Similarly high on the agenda at the two-hour meeting was Israel's continuing travel ban on the Palestinian leader Yasser Arafat - an issue Israel agreed to "study seriously," an unnamed Palestinian official told AFP.
The two sides also discussed Palestinian demands for further Israeli troop withdrawals from the West Bank and the removal of army checkpoints.
"We discussed about the checkpoints and cities and we declared that we are ready to control any city which Israel withdraws from," Mr Amr said.
The Israeli Defence Minister Shaul Mofaz and Palestinian Minister of State for Security Mohammed Dahlan are to discuss the issue further.