Peace talks between Israel and the Palestine are on the verge of collapse, Xinhua reported Tuesday citing the Ma'ariv daily.
According to the report, the current issues that may end the talks are borders, and the Israeli demand for military control along the border with Jordan near the West Bank.
The Palestinians object to Israel's military presence in what could potentially be the eastern front of the Palestinian state, and they say a military presence will damage the essence of the state they wish to establish.
"We prefer the existing situation than to live inside a closed cage," Palestinian sources were quoted as saying by Ma'ariv, insisting Palestinian forces be placed at the Jordanian border.
According to the report, Israel refused any alternative, including allowing international peace keeping forces in the territory.
Palestinians reject Israel's demand that a future Palestinian state be demilitarised.
"(Prime Minister Benjamin) Netanyahu has put himself into a deadlock with his demand for a demilitarised state. It's a logical failure. Netanyahu is beginning to realise the negotiations have ended before they had even started," a source in Jerusalem told the daily.
Israel and the Palestinian Authority started the current round of peace talks in late July in Washington after a three-year halt in talks.
Israel's ongoing expansion of its West Bank settlements, however, has continued.
Some of the key issues to be resolved are the establishment of the Palestinian state on lands Israel annexed in the 1967 Mideast War, the fate of the Israeli settlements, the question of the Palestinian refugees banished in the 1948 War, and the status of Jerusalem.
Netanyahu gave a hawkish speech last week, in which he charged the source of the conflict between Israel and the Palestinians has "nothing to do with the settlements".
This statement was slammed by left-wing politicians who said Netanyahu is "regressing rather than advancing".
The peace talks have been held inconspicuously, without information about the time, location and or the nature of the meetings.
Last month, there were several reports indicated that the talks had reached a dead-end over the discussion of the boundaries of the future Palestinian state.
In the past couple of months, tensions have also mounted during the negotiations on Israel's recent announcement of its plans to build more than 1,600 housing units in the West Bank and east Jerusalem.
American officials, including Middle East Peace Envoy Martin Indyk and Secretary of State John Kerry, had urged both sides to carry on the talks regardless of the settlement activity.