The announcement dampened hopes for a resolution to the three-month old conflict less than a week after the two sides returned to the negotiating table in a dialogue organized by foreign ministers from across the hemisphere.
"The process of dialogue ... has been completely broken," Patricia Rodas, the foreign minister in Zelaya's ousted government, told Latin American presidents meeting in Cochabamba, Bolivia. "The intransigence of the dictatorship led to the failure."
Her comments came moments after Zelaya rejected a proposal from interim President Roberto Micheletti that called for allowing the Supreme Court to decide whether the ousted president should be allowed to return to power.
"The proposal is completely unacceptable," said Victor Meza, a member of Zelaya's negotiating team.
Micheletti submitted the proposal in response to a compromise solution offered by Zelaya, which would have had the Honduran Congress vote on whether to allow his return to office.
Although Congress voted to back Zelaya's ouster, lawmakers have since said they would support any agreement that emerged from talks. There has been no such assurance from the Supreme Court, which had ordered Zelaya's arrest days before the coup. Instead of arresting him, soldiers flew Zelaya into exile at gunpoint on June 28.