South Sudan has cancelled planned direct talks with its northern neighbour, Sudan, after accusing Khartoum of carrying out new air strikes on its territory.
The South said the talks would be held through an African Union panel instead.
Earlier, the South's military said an air raid on Friday injured two people. Sudanese officials rejected the claims.
The UN has set a deadline of 2 August for them resolve disputes dating from their split into two separate nations.
South Sudan became independent from Sudan a year ago, in a move that was supposed to herald the end of more than 50 years of bitter conflict.
But many issues remain unresolved, including border disputes and disagreements over oilfields, transport payments and divisions of the national debt.
The two sides were supposed to meet face-to-face in the Ethiopian capital Addis Ababa to thrash out a deal on these issues.
But Friday's alleged air strikes in the border state of Bahr el-Ghazal appear to have ended hopes for immediate direct talks.
"We were left with no choice but to suspend our direct bilateral talks with Sudan," said Atif Kiir, the spokesman for Juba's delegation at the talks in Addis Ababa.
"You cannot sit with them to negotiate when they are bombing our territory."
Sudan's official news agency quoted negotiator Omar Dahab as denying the claims.
"SAF [Sudanese Armed Forces] didn't violate South Sudanese territory," Mr Dahab said, in comments translated by the AFP news agency.
He said Darfuri rebels had tried to attack Sudan by coming through South Sudanese territory, and the Sudanese army had responded, but insisted the engagement was inside Sudan.