There are "substantial political differences" over the PM's demands for welfare curbs for EU migrants, the European Council president says.
Donald Tusk said there was "presently no consensus" within the EU about David Cameron's desire to restrict in-work payments for four years.
Mr Tusk has written to EU leaders warning that uncertainty over the UK's future in the EU was "destabilising".
The PM said he was encouraged the UK's reform agenda was being "taken on".
But former Labour chancellor Alistair Darling warned that the UK's future in the EU was now "in the balance".
Last month David Cameron set out his goal of a "new settlement" for the UK in the EU, made up of four key objectives:
- Protection of the single market for Britain and other non-euro countries
- Boosting competitiveness by setting a target for the reduction of the "burden" of red tape
- Exempting Britain from "ever-closer union" and bolstering national parliaments
- Restricting EU migrants' access to in-work benefits such as tax credits
In his letter, Mr Tusk described the PM's plans as a "significant and far-reaching agenda".
Of the four strands to the UK's demands, he said welfare reform was the most "delicate" and would require "substantive political debate" at this month's EU summit.
Mr Cameron is attempting to reduce co-called "pull factors" for migrants in an attempt to reduce immigration figures.
Mr Tusk wrote: "This is certainly an issue where we need to hear more from the British prime minister and an open debate among ourselves before proceeding further."
On the demand to protect the interests of countries like the UK which are members of the EU but not of the euro currency, Mr Tusk said non-eurozone countries could have a mechanism to raise concerns, but appeared to rule out a "veto" right.
On the question of the founding principle of "ever-closer union", he does not offer a view one way or the other on the UK's request to be exempted from that goal.
Mr Tusk said the idea of "ever closer union" allowed countries to integrate at different levels and that there was a "largely-shared view" on the importance of national parliaments.
The European Council president said good progress was being made in the talks, describing his role as that of an "honest broker" and saying all states had to show "readiness for compromise".
He added: "Uncertainty about the future of the UK in the European Union is a destabilising factor. That is why we must find a way to answer the British concerns as quickly as possible."
Mr Cameron said "of course" the whole renegotiation was difficult and said he hoped for a successful conclusion.
His official spokeswoman said Mr Tusk's letter "marks another step forward in the renegotiations".
UK's EU referendum in-depth
The PM, who has not ruled out campaigning to leave if his demands are refused, has already said a deal will not be reached by Christmas. Mr Tusk recently said this month's EU summit should "pave the way" for a deal by February.
Robert Oxley, from the Vote Leave campaign, was dismissive of the PM's demands.
"The one thing you could not describe these reforms as is ambitious," he told the BBC.
But Lucy Thomas, of Britain Stronger In Europe, said it was a "really good agenda for reform" which "the rest of Europe wants to see as well".
However, Mr Darling suggested that Mr Cameron's demands would have little impact on the final result of the referendum and those, like him, who wanted the UK to remain in the EU were not starting the campaign in "a great place".
"What I do say is if we don't start making the argument soon in a way that impinges on the consciousness of the people of this country, the risk is you are leaving it awfully late."
Meanwhile Syed Kamall, leader of the British Conservatives in the European Parliament, suggested there would have to be a compromise on the deal, saying "that's the way business is done in this town".
"You are going to see a compromise of some form, but both sides will be pushing as hard as possible. I know the British Government will definitely be pushing for all four of their demands but let's see what the compromise is at the end of the day," he told BBC political correspondent Alex Forsyth.