Heavy diplomatic wrangling by Western and Gulf diplomats keen to resolve the three-month stand-off had secured an agreement in principle that would see Saleh resign within a month.
But last-minute snags over details derailed the deal that would have granted Saleh immunity from prosecution, allowing him a dignified exit from power in the Arabian peninsula state he has ruled for nearly 33 years.
A government official said a deal remained possible. “There is still a glimmer of hope,” he said.
But the leader of a bloc of Yemen’s wealthy oil-exporting Gulf neighbours who has been trying to breathe life into the deal left Sanaa without securing an agreement, in a move that suggests the sides remained significantly at odds.
The US and Saudi Arabia, both targets of foiled attacks from al-Qaida’s Yemen- based wing, are keen to see an end to the political stalemate, fearing continued chaos could give the militant group more room to operate freely.
The White House urged Saleh to sign and implement a transition deal so Yemen could “move forward immediately” with political reform. It said John Brennan, an adviser to President Barack Obama, called Saleh earlier in the day.
“Brennan noted that this transfer of power represents the best path forward for Yemen to become a more secure, unified, and prosperous nation and for the Yemeni people to realise their aspirations for peace and political reform,” the White House said.
Saleh indicated in April he would sign the Gulf-brokered deal, but refused to put his name to it in the final hours. He said he would only sign in his capacity as ruling party leader, not as president.
The opposition, including Islamists and leftists, said the deal tentatively agreed on Wednesday contained minor changes to the April deal.
“The president will sign for the government in his capacity as president of the republic and as head of the ruling party,” an opposition official said.
The deal broke down after a dispute on who would sign for the opposition. Saleh wanted the rotating head of the coalition, Yassin Noman, a leftist, to sign.
The opposition preferred Mohammed Basindwa, tipped as a possible interim prime minister.
The opposition agreed to have Noman as the first opposition signatory, but also wanted Basindwa to be on a list of signatories. Saleh refused and the deal fell through.
Protesters, frustrated that their daily rallies have failed to dislodge Saleh, want the leader out immediately and said they will step up their campaign by marching on government buildings, a move that brought new bloodshed last week as security forces fired to stop them.