Talks between Israel and Hamas over a crucial exchange of Palestinian prisoners for an Israeli soldier ended without agreement Monday in a breakdown that could have far-reaching consequences for the barricaded Gaza Strip.

Israel has said it will not ease its blockade of Gaza until the soldier, Gilad Schalit, is returned home. The blockade has impeded reconstruction in Gaza following Israel’s devastating January offensive, preventing supplies and goods from reaching the public.

Israeli Prime Minister Ehud Olmert accused Hamas of taking an "extremist" stance in last-ditch talks in Cairo. Olmert’s comments signaled the talks had not reached a deal and came as two Israeli envoys returned home from Egypt.

Prime Minister Olmert said earlier that this was the last chance for an agreement before he leaves office. He is set to be replaced by Benjamin Netanyahu, who is putting together a hard-line government that is likely to be less receptive to Hamas demands. Netanyahu hopes to take office in the coming days.

Hamas has demanded freedom for hundreds of prisoners held in Israeli jails in exchange for the soldier, whose case has become an emotional touchstone for many Israelis. It is widely believed that a prisoner exchange and a long-term truce could have boosted Fatah-Hamas reconciliation talks, also in Cairo.

(Agencies)