The leaders were drafting a formal reply to Kerry that is expected to ask him to make several specific guarantees before Palestinians agree to resume peace talks, a senior Palestinian official said.
The decision was a setback for Kerry, who is due to wrap up his sixth trip to the region in as many months on Friday.
It came a day after the Arab League endorsed Kerry's proposal to restart direct negotiations for the first time since they collapsed in 2010 amid disagreement over building in occupied lands.
The Palestinians' decision followed hours of closed-door deliberations on Thursday, which participants described as stormy, among leaders of Palestinian Authority Chief Mahmoud Abbas's Fatah Party and other Palestinian factions in the West Bank city of Ramallah.
The senior Palestinian official said the leaders would ask Kerry for three guarantees: a pledge that Israeli regime will freeze building in Jewish settlements while peace talks are continuing; a pledge that Israel's 1967 borders will form the basis of negotiations, and a time limit on negotiations to prevent Israeli regime from dragging them out indefinitely as Palestinians have accused Israel of doing in the past.
Kerry has given Abbas oral guarantees that address the Palestinian concerns, but the Palestinian leadership wants Kerry to make those guarantees publicly or in writing, according to Amin Maqbul, a Fatah Party leader.
A senior State Department official called the Palestinian debate appropriate and encouraging.
"We understand that there are many strongly held views and appreciate efforts to find a basis to move forward," the official said, adding that Kerry planned to consult with the parties on Friday before returning to Washington.
A spokesman for Israeli Prime Minister Benjamin Netanyahu declined to comment on the deliberations in Ramallah.
The spokesman, Mark Regev, did say that Israel hasn't accepted the principle of 1967 borders with land swaps as a basis for negotiations.
That principle has formed the backbone of the Israeli-Palestinian peace process since the early 1990s.
The Israeli refusal to accept it appeared to have been a main factor in the Palestinians' decision.
NJF/NJF