Israeli Prime Minister Ariel Sharon has said he will not revive peace talks with Syria as long as Palestinian militant groups operate in Damascus.
Mr Sharon is in no rush to resume talks with Syria
Mr Sharon said that President Bashar Assad had not taken "the smallest step" against Palestinian militants based in the Syrian capital.
Syria, which had recently suggested renewed negotiations, rejected the Israeli conditions as "unacceptable".
Hamas and Islamic Jihad both have headquarters in Damascus.
"I would not advise Israel entering into a system of dialogue with the Syrians when all the terror groups are operating there", said Mr Sharon.
Only when conditions were ripe, Mr Sharon told reporters, would he meet with his Syrian counterpart.
Syrian Foreign Minister Farouq al-Shara later responded at a press conference in Damascus.
"We have proposed a resumption of negotiations without conditions", he said. "I know notice the Israeli prime minister is setting conditions on Syria - that is unacceptable."
The Syrian offer had been conveyed via the UN's Middle East envoy, Terje Roed-Larsen, during a meeting with President Assad on 24 November.
Mr Roed-Larsen advised Israel to take the opportunity.
Negotiations between Israel and Syria broke down in 2000 over control of the shore of the Sea of Galilee.
The shore is part of the Golan Heights, conquered by Israel during the 1967 war and later annexed.
Syria wants to resume of talks from where they left off, but Mr Sharon - who came to power in 2001 - wants to start again from scratch.