Argentine President Cristina Fernandez de Kirchner signed legislation last year to seize 51 percent of the YPF shares held by the Spanish energy company. The European Commission said it was frustrated by the move and Repsol last year threatened legal action.
Repsol's board of directors announced it rejected a compensation offer made by the Argentine government.
The deal would have given Repsol drilling rights to Argentina's vast Vaca Muerta shale natural gas field and 47 percent ownership in a new company. The deal, valued at $5 billion, was deemed "unsatisfactory" by the board of directors, the company said Wednesday.
The board said the offer "did not satisfy the losses suffered by Repsol" by the seizure.
Repsol said in a statement it hopes the Argentine government maintains "an open attitude" in future negotiations aimed at resolving the dispute.
The Argentine government called on Repsol to abandon a $10.5 billion legal claim against it if the proposal were accepted.
Brent, WTI unable to hold rally
Producers call for end to oil export ban