The US had reached a tentative deal with Taliban to allow, among other things, transfer of five Afghans from the Guantanamo Bay prison in lieu of their public renunciation of terrorism, but the agreement failed to take off because of Hamid Karzai's objections.
A report in the Washington Post has claimed that the deal was the closest the two parties came to genuine peace negotiations after nearly a year of talks, and was part of the Obama administration's accelerated push towards bringing curtains down to the war in Afghanistan.
The tentative accord, reached last month between the US and Taliban negotiators would have called for the prisoners to be sent to house arrest in Qatar, where the Taliban planned to open an office, and additional actions by both sides, the report said quoting anonymous US and European officials.
The deal was, however, derailed after Karzai balked at its terms, the paper said.
"Right now, things have stopped... Everybody is taking a deep breath," a senior administration official was quoted as saying.
Contacts with the Taliban are expected to be reestablished early next year.
The paper said the negotiations that came amid a rift with Pakistan, and economic and political pressures with war fatigue, reflect a marked change in the administration's attitude over the past year.
While US commanders say the Taliban's interest in talks stems from their opponents' gains on the battlefield, they also believe political accommodation now will better position them for future struggles after the US troops withdraw.