Military experts said the move was expected to boost South Korean designs to sell its supersonic aircraft to Singapore ahead of an announcement of the final bidder next month.
The United Arab Emirates had picked Alenia Aermacchi M-346 last February as part of an order for 48 aircraft, including in the lighter fighter version. The M-346 beat out the T-50, built by Korean Aerospace Industries in conjunction with Lockheed Martin.
The deal was a major setback for Seoul's bid to make its first overseas sale of the T-50.
Since then, however, the purported $1.4 billion contract has been stalled over a dispute between the United Arab Emirates and Alenia Aermacchi, a subsidiary of Italy's Finmeccanica.
"There was a misunderstanding between senior officials in the (United Arab Emirates) and Finmeccanica leadership over specifications," The Korea Times reported, citing an unnamed official privy to the talks.
"Some components they thought they were getting were not included. The (United Arab Emirates) went back to the Koreans and is in advanced talks. They are back to the T-50 and a new deal could come very soon," the source said.
It was not immediately clear whether the revamped negotiations with the South Koreans signaled a definitive break with Aermacchi or it was part of a negotiating ploy of United Arab Emirates officials. There was also no indication what technical components sparked the dispute.
Lockheed has made no comment and Finmeccanica refused to acknowledge termination of the deal.
"It is a complex deal and our negotiations are going ahead," a spokesman was reported saying in the local media.
The M-346 and T-50 rank among the most advanced training aircraft on the market. They are also shortlisted in Singapore's jet trainer contest and both displayed flights at the Singapore Air Show.
Analysts suggest that the about-face in the United Arab Emirates' decision stemmed from a landmark $20 billion deal between South Korea and the Middle Eastern country to build four nuclear reactors there.
As part of that deal, both nations agreed to bolster their defense cooperation, with South Korea promising to transfer unmanned-aerial-vehicle-related technologies, ballistic missiles and electromagnetic pulse bombs to the United Arab Emirates.
Celebrity Couples of 2014 [PHOTOS]