The incentive package meant to lure the PA to the negotiating table includes handing over more control of Area B, which makes up about 20 percent of the West Bank, Ynetnews.com reported Friday.
While West Bank security is handled equally under Israeli and Palestinian control, civil functions are totally under Palestinian control.
The incentives offered Thursday in Ramallah, were rejected by the Palestine Liberation Organization's Executive Committee, Ynetnews.com said.
The PA then decided not to restart peace talks.
Ramallah insists that, for the Palestinian Authority to begin peace negotiations, Israel has to stop all settlement construction and agree to a two-state solution.
Fatah Executive Committee member Hussein Sheikh said the Palestinians believe the incentive package is an empty gesture.
"We don't link confidence-building measures with the negotiations. There are obligations that Israel must follow according to the Road Map," Sheikh said.