The IRA has withdrawn its plan to put its weapons beyond use.
The terrorist group's leadership announced the decision after David Trimble's Ulster Unionists rejected the proposal, which the IRA had put to General John de Chastelain's decommissioning body.
In a statement, the IRA said: "Conditions therefore do not exist for progressing our proposition. We are withdrawing our proposal."
With the future of the Northern Ireland peace process already on a knife–edge, it is a huge blow to Prime Minister Tony Blair's bid to try to negotiate a settlement to end the deadlock threatening the future of the Good Friday Agreement.
A new round of talks involving all the pro–Agreement parties are due to get under way in an attempt to agree a deal on disarmament, demilitarisation and future policing arrangements, but the decision by the IRA leadership is bound to heighten difficulties.
Ministers and senior civil servants in London and Dublin will also be dismayed but not surprised given the republican outcry over the Government's decision to suspend the Northern Ireland Assembly for 24 hours.
That decision came after the sides refused to endorse an Anglo–Irish package of proposals which Mr Blair and the Republic's Taoiseach Bertie Ahern believed could end the impasse.
It followed Mr Trimble's resignation as First Minister in protest at the refusal by the IRA to start emptying their secret arms dumps.
Unionists said the plan to put their guns completely and verifiably beyond use did not go far enough, and there were claims in Belfast today that the arrest of three republicans in Colombia confirmed the party's doubts about the IRA's commitment to peace process.
The Provisionals leadership said their plan was an unprecedented development "which involved a very difficult decision by us and problems for our organisation."
But the IRA said the unionist rejection, compounded by what they claimed were the setting of preconditions and the Government's failure to fulfil its commitments, were totally unacceptable.
The statement added: "The conditions therefore do not exist for progressing our proposition. We are withdrawing our proposal. The IRA leadership will continue to monitor developments. Peacekeeping is a collective effort."
It is not clear if the Provisionals will end direct contact with General de Chastelain himself.
The sides have met eight times since March, but there must a question mark over the likelihood of further meetings, at least in the foreseeable future.
After the former Northern Ireland Secretary Peter Mandelson suspended the Assembly in February last year, again over republican resistance to unionist demands to disarm, face–to–face meetings ended until March this year.