The head of Italy's centre-left bloc has failed to form a coalition cabinet after week-long talks with other political leaders.
Speaking in Rome, Pier Luigi Bersani said some parties' objections and conditions were "unacceptable".
His Democratic Party narrowly won the elections last month but lacks the upper house majority needed to govern.
President Napolitano will hold a new round of all-party talks on Friday in an attempt to break the deadlock.
Italy remains in political limbo while the head of state ponders whether to ask another politician to form a new government or call for fresh elections, the BBC's David Willey, in Rome, reports.
The stalemate is delaying reforms that could help revive Italy's recession-hit, debt-laden economy.
On Thursday evening, Mr Bersani said he had informed President Napolitano of "significant, positive elements of understanding" in the talks.
"I also explained the difficulties deriving from objections or conditions which I did not consider acceptable," he told reporters in Rome.
Mr Bersani spent a week talking to trade unions, employers and political leaders but failed to persuade the other main parties to join with him or to create the basis for a minority government, our correspondent says.
The two other major players involved in the discussions are the anti-establishment Five Star Movement, led by ex-comedian Beppe Grillo, and former Prime Minster Silvio Berlusconi's centre-right bloc.
Officials said President Napolitano would start the round of consultations with Mr Berlusconi's People of Freedom party on Friday morning and end them with the Democratic Party in the evening.
Mr Berlusconi previously offered to join the centre left in a broad national coalition, but Mr Bersani said there was too wide a cultural gap between them.
The Five Star Movement won an unexpected 25% in the election and holds the balance of power - its leader has refused point blank to associate himself with Mr Bersani, who said on Wednesday "only a mentally ill person" would want to govern Italy now.
Caretaker Prime Minister Mario Monti told the Chamber of Deputies he "can't wait" to leave office.
The economist and former EU commissioner was appointed caretaker prime minister in November 2011.
His austerity measures proved widely unpopular and in last month's election his group came fourth with just 10% of the vote.