The Democratic Unionist Party has withdrawn support for a controversial new peace centre at the site of the former Maze prison.
First Minister Peter Robinson said it would be wrong to proceed with the development because there was no consensus on how the centre would operate.
In a letter to DUP colleagues Mr Robinson said: "Northern Ireland would be a laughing stock across the world if its peace centre was the cause and source of division. And there the problem arises. Given the behaviour of Sinn Fein, unionists just do not believe Sinn Féin is committed to creating and maintaining this kind of genuinely neutral shared space at the Maze."
The Maze housed paramilitary prisoners from the 1970s until 2000 and critics of the new development fear it could become a shrine to terrorism.
The prison hospital where 10 republican inmates, including the MP Bobby Sands, died while on hunger strike in 1981 is among parts of the jail that were retained when the site was cleared for redevelopment.
A watchtower and one of the H Block cells were also kept.
Mr Robinson cited the removal of the Union flag from Belfast City Hall on all but designated days; the naming of a play park after a dead IRA man; rising tensions over loyal order parades and the Sinn Féin-backed decision to stage a IRA commemoration parade in Castlederg, Co Tyrone among the reasons for the decision to veto the peace centre plans.
He claimed his party had also consulted widely on the issue.
Mr Robinson added: “The events of recent months and in particular the insensitive attitude displayed by Sinn Fein towards the innocent victims of IRA terrorism has seriously damaged community relations and set us all back in terms of promoting genuine reconciliation and building a shared future.
“For the centre to be successful in promoting peace and reconciliation there must be a broad consensus about how it will operate. We have consulted widely and it is clear that the necessary wide-ranging consensus does not exist at present. It is my view that it would be wrong to proceed in the absence of a much broader consensus.”
Planning permission for the peace centre, close to the retained structures, was granted in April and sparked a wave of protests led by the Traditional Unionist Voice and Ulster Unionist Party.
A number of victims’ groups and organisations representing former security force personnel and their families also opposed the plans and called for the watchtower and H-block cells to be demolished. The recently developed Titanic Quarter in Belfast was suggested as an alternative site.
The DUP claimed it was still committed to participating in talks led by US diplomat Dr Richard Haas in the autumn which aim to tackle contentious issues such as parades, flags and dealing with the past.