Leaders from Serbia and Kosovo have failed to come to agreement on the status of Serb-dominated northern Kosovo in talks held in Brussels.

EU foreign policy chief Catherine Ashton, who had been mediating in the talks, said in a statement that the gap between the two sides was "very narrow, but deep."

She said the 12-hour negotiating session in Brussels on Tuesday was the last time all sides would meet formally for the EU-brokered talks.

Serbian Prime Minister Ivica Dacic and Kosovo Prime Minister Hashim Thaci would return home to consult colleagues and decide on future steps, she said.

Kosovo, a former Serbian province, declared independence in 2008. While many countries have recognised it as an independent country, Serbia has not.

Serbian 'hesitation'

Thaci said Kosovo had put forward proposals in line with its laws and constitution - proposals that he said would have integrated all citizens, including ethnic Serbs, into the life of Kosovo.

But he said the proposals were met with "hesitation" on the Serbian side. He said the Serbian officials had decided to "reflect" and he still hoped an agreement could be reached next week.

Kosovo fears that a large degree of autonomy for the north runs the risk the area would eventually break away.

The ethnic Serbs living in northern Kosovo, up to 50,000 people in and around the divided city of Mitrovica, have rejected the authority of the government in Pristina, the Kosovan capital.

They have created so-called parallel institutions, including hospitals and schools, all financed and supported from the Serbian capital, Belgrade.

However, in order for Serbia to join the EU it must normalise relations with Kosovo.

That includes not only resolving issues such as trade and border control, but also resolving the status of northern Kosovo, and whether it falls under the authority of the government in Pristina.