Israeli and Palestinian negotiators have held their first formal session of peace talks since 2000, but reports say it was dominated by recriminations.
Palestinian delegates voiced objections to settlement growth
Arguments revolved around plans for new building work in Israeli-occupied East Jerusalem, officials said.
A Palestinian negotiator said the only positive outcome was that the two delegations had agreed to meet again.
It is a fortnight since the two sides' leaders pledged at Annapolis to seek a Palestinian statehood deal before 2009.
Correspondents say the meeting had been meant to set in motion negotiations on so-called core issues - borders, Palestinian refugees, Jerusalem and water.
Former Palestinian Prime Minister Ahmed Qurei said in a statement that the delegation had demanded a total stop to fresh settlement activity, including what Israel describes as "natural growth".
Last week Israel sent out tenders for 300 houses. The plans to expand the Har Homa settlement have been criticised by the American and British governments, and by the European Union.
"If you want to restore the credibility of the peace process, the Israeli government must revoke this order," said Palestinian negotiator Saeb Erekat.
Israel disputes the occupied status of the land - known as Abu Ghneim in Arabic - arguing it annexed all of East Jerusalem after capturing it during the 1967 war.
Wednesday's talks, held in Jerusalem, were led by Mr Qurei and the Israeli Foreign Minister, Tzipi Livni. They lasted just 90 minutes.
The talks were moved from the famous King David Hotel to another hotel in West Jerusalem at the last minute. This has been interpreted as an attempt to lower their profile by Israel.
A minority of Israelis bitterly oppose a future Palestinian state
An unnamed Israeli official criticised the Palestinian negotiators for raising the issue of Har Homa, as well as recent Israeli military action in Gaza.
"We really wanted to see it as a procedural meeting in good spirit... They created a tense atmosphere," the Associated Press quoted the official as saying.
The official said Israel had, in turn, complained about ongoing Palestinian rocket fire from the Gaza Strip.
On Wednesday morning, Palestinian militants fired 15 unguided rockets at Israel, one of which injured a girl with shrapnel.
It followed an Israeli incursion into Gaza on Tuesday, one of the largest in months, that killed six militants.
The Gaza Strip is under the control of the militant Hamas movement which refuses to recognise Israel's legitimacy and is excluded from the peace talks.
The Islamist group, which won parliamentary elections in 2006, drove Abbas loyalists by force out of the narrow coastal strip in June, adding another major obstacle in progress towards a two-state solution.