Talks between rival Palestinian factions Fatah and Hamas have collapsed, Palestinian Authority and Fatah leader Mahmoud Abbas has said.
Yemen's plan calls for Gaza to be run by a national unity government
Both sides blamed each other for the failure of the discussions, which took place in Sanaa, in Yemen.
Mediators called for Gaza to be returned to the control of a national unity government and new elections.
Fatah and Hamas admit their feud is damaging the Palestinian cause but will not yet compromise, correspondents say.
The BBC's Aleem Maqbool says the major sticking-point appears to be Fatah's insistence that Hamas give up the power it took by force in Gaza in June 2007.
Hamas refuses to do that without conditions. It has previously ruled out new elections, saying it won the right to govern in a fair vote two years ago.
When Hamas overran Fatah forces in Gaza last year, Mr Abbas responded by dismissing the Palestinian Prime Minister, Hamas's Ismail Haniya, leaving Gaza under the control of Hamas.
The Palestinian-controlled areas of the West Bank fell under the Palestinian Authority, headed by Mr Abbas. Fatah and Hamas have had very little direct communication since then.
There was divison over why the Sanaa talks failed.
Mr Abbas said Hamas "did not accept the formula proposed by Yemen and expressed reservations that voided it of substance...
"Our delegation will come back home tomorrow but it is ready to head back to Yemen once Hamas accepts the initiative as is."
But Hamas officials denied they had rejected the proposals. The senior Hamas official at the talks in Yemen, Moussa Abu Marzuk, told al-Arabiya television they had approved the initiative "in all its seven articles for discussion with the Fatah movement...
"The brothers made the mistake of dispatching a delegation that had nothing to do with (Fatah-Hamas) dialogue - they sent a PLO delegation whereas the Yemeni initiative is concerned with dialogue between Fatah and Hamas."
The Palestinian Liberation Organisation (PLO) umbrella group includes Fatah, but not Hamas.
Mr Marzuk said on Wednesday that the militant Islamist group would share control of Gaza with Fatah if Mr Haniya was reappointed as prime minister.
Both sides did agree to meet for further discussions.