The Palestinians threatened on Saturday to suspend all communication with the US if the Trump administration follows through with plans to close their diplomatic office in Washington.
The potential rupture in relations threatens to undermine President Donald Trump's bid for Middle Eastern peace - a mission he has handed his son-in-law, Jared Kushner.
Senior Palestinian negotiator Dr Saeb Erekat said the US decision was "very unfortunate and unacceptable", and accused Washington of bowing to pressure from Israeli Prime Minister Benjamin Netanyahu's government "at a time when we are trying to cooperate to achieve the ultimate deal".
In a video statement on social media, Dr Erekat said: "We will put on hold all our communications with this American administration."
There was no immediate reaction from the Trump administration. Mr Netanyahu's office said the closure was "a matter of US law."
US officials had insisted before Dr Erekat's statement that the move wasn't aimed at increasing leverage over the Palestinians, but merely the unavoidable consequence of US law.
Cutting off ties would carry great risks for the Palestinians. It could antagonise an administration they already suspect is biased toward Israel and put millions of dollars of critical US aid in jeopardy.
However, it would also deal an embarrassing blow to the Trump administration ahead of an expected peace initiative and potentially prevent it from getting off the ground.
The US administration announced late on Friday that the Palestinians had run afoul of an obscure legal provision that says the Palestine Liberation Organisation (PLO) cannot operate a Washington office if the Palestinians try to get the International Criminal Court to prosecute Israelis for crimes against Palestinians.
Secretary of State Rex Tillerson determined that the Palestinians crossed that line in September, when Palestinian President Mahmoud Abbas called on the court to investigate and prosecute Israelis, according to State Department officials.
It wasn't clear when the office would close or whether the Palestinians would have to clear out of the building entirely or just close it to the public.
Riyad Al Malki, the Palestinian foreign minister, said he was told by the Americans that US and State Department legal teams would meet on Monday to decide how the new situation would affect the office, the functioning of diplomats and contacts with the Palestinians.
"We will wait to hear back from them," Mr Malki said. After that, the Palestinians will decide how to react.
Under the law, Mr Trump now has 90 days to consider whether the Palestinians are in "direct and meaningful negotiations with Israel". If Mr Trump determines they are, then the office can remain open, officials said.
The US said it wasn't cutting off relations with the Palestinians and remained focused on a comprehensive peace agreement between Israelis and Palestinians. One US official said, in an email cited by AP, that "this measure should in no way be seen as a signal that the US is backing off those efforts".
The Palestinians quickly dismissed that argument, with Mr Malki telling Palestine Radio that the Palestinian leadership "will not accept any extortion or pressure". Dr Erekat contended the move was the result of "the pressure being exerted on this administration by the Netanyahu government".
Meanwhile, PLO spokeswoman Hanan Ashrawi denounced the threat to close the office as "blackmail" by the US.
"If they want to suspend official relations with the Palestinians, if they want to close the office, that certainly would disqualify them from any role in peacemaking," she told The National.
"How can they make peace if they boycott official contact with the Palestinians? If they think they can blackmail us into more concessions, what concessions exactly do they want?"
She said such a move by the US "would only be encouraging and supporting Israeli impunity".
"We can't accept this effort to frighten us or impose conditions on the Palestinian people," added PLO executive committee member Wasel Abu Yusuf.
"Talk of closing the office is completely rejected. There will be no change in our policy. We will not withdraw from our position toward the ICC or any position that supports freedom and independence for our people."