Israel and the European Union have failed to resolve a row over Israel's controversial barrier in the West Bank.
Israel has long tried to keep out Europe as a mediator
High-level talks in Tel Aviv came against a backdrop of Israeli anger at international opposition to the barrier, which EU countries share.
Foreign Minister Silvan Shalom said he doubted if Israel could trust Europe any longer as a negotiating partner.
But EU envoy Javier Solana spoke of balancing Israel's security needs with the humanitarian needs of Palestinians.
The EU voted as a bloc last Tuesday in favour of a UN General Assembly resolution calling for the removal of the barrier, following a ruling by the International Court of Justice that it was illegal.
Israel has reacted strongly to the vote. It says the proposed 640km system of fences and walls is necessary for security.
"I find myself challenged to convince the Israeli people that the European Union is a partner we can trust," Mr Shalom said at the joint news conference.
Mr Solana said the EU had made clear long ago its opposition to the barrier because it cuts through occupied Palestinian land.
"A country has the right to build a fence on its own territory but we believe the route of this fence is contrary to international law," Mr Solana said.
Israel has long sought to sideline the EU and UN, which it views as biased, from Israeli-Palestinian peacemaking efforts, favouring the mediation of the US.
Peace talks plan
During the day details emerged of plans for a Middle East peace conference being arranged by Egypt, Israel and the US.
The meeting, set for October, would be to help Israel's Gaza withdrawal plan.
However, Mr Shalom downplayed the its prospects during his press conference with Mr Solana.
"It cannot come instead of taking
measures against terrorism," he said.
Israel was furious that the EU voted as a bloc at the UN
It appears negotiators have been focusing on holding the talks either at foreign minister level on the sidelines of the UN General Assembly in New York, or at the level of heads of government in Cairo.
The conference would make arrangements for the situation following the planned Israeli withdrawal from Gaza, a US official quoted by the Associated Press said.
Israel is planning to pull all its 7,000 settlers from Gaza and the troops that protect them as part of a disengagement plan.
Israel will maintain control of Gaza's borders, coastline and airspace.
These developments come amid rising instability in the Gaza, following a wave kidnappings and violent protests as members of Palestinian leader Yasser Arafat's Fatah movement jockey for position.
Mr Solana suggested the EU might "rethink" its support for Mr Arafat if
his prime minister, Ahmed Qurei, falls as a result of the crisis.
Mr Qurei has tendered his resignation over Mr Arafat's refusal to allow his cabinet to carry out democratic reform.