Two senior Israeli envoys - special negotiator Ofer Dekel and the head of Israel's internal security service Yuval Diskin - held two days of crucial talks in Cairo with Egyptian mediators to try and agree a prisoner swap with the Hamas movement, who are demanding the release of at least 450 Palestinians in exchange for Gilad Shalit, a 22-year-old Israeli conscript seized in a cross-border raid in June 2006.
"During the discussion it became clear that Hamas has toughened its position, has fallen back on the mutual understandings that have been formed over the last year, and has raised their demands in spite of the generous offers that were made to [Hamas] during this round of consultations," the press release said.
The Palestinian movement Hamas, who controls the Gaza Strip, has made no comment on the talks.
Israeli Prime Minister Ehud Olmert has recently intensified efforts to secure the release of Shalit in an apparent attempt to end his three-year term in office on a positive note.
According to experts, a new Israeli government, which is being formed by right-winger Benjamin Netanyahu, could be less willing to discuss the release of prisoners in light of continuing militant rocket attacks on Israeli regions bordering Gaza.