The Democratic-led US Senate has rejected conditions that House Republicans attached to a temporary spending bill needed to avert a federal government shutdown.
Hours before a midnight (5am UK time) deadline, the Senate voted 54-46 to strip a one-year delay in President Barack Obama's healthcare law from the bill that would keep the American government operating.
The Senate also stripped out a provision that would have eliminated a tax on medical devices.
House Republicans added the provisions early yesterday in their campaign to undo Mr Obama's signature domestic programme.
The vote came less than 10 hours before a possible shutdown and with no compromise in sight.
Democrats - and a few Republicans - are pressing for the House to approve a straightforward spending bill with no conditions.
It is now up to the House of Representatives to accept a bill that does not delay the health initiative - which it has refused to do - or find an alternative acceptable to the Senate.
If it fails to do either of those options, the US government faces its first partial shutdown in 17 years. It would force 800,000 federal workers off the job without pay and rattle the country'sshaky economic recovery.
"We're at the brink," said Senator Barbara Mikulski, a Democrat, as House Republican leaders calculated their next move.
Some critical services would continue during a shutdown, such as patrolling the borders and controlling air traffic. The US State Department would continue processing foreign applications for visas, and embassies and consulates overseas would continue to provide services to American citizens.
Despite no signs of a compromise, Mr Obama insisted he is "not at all resigned to a shutdown" and he expected to speak to congressional leaders throughout the day to address the impasse.
The president has vowed not to allow Republicans to use the spending bill to derail his most important domestic policy achievement.
"There's a pretty straightforward solution to this," Mr Obama said at the White House. That is for "everybody to act responsibly and do what's right for the American people".
The prospect of a shutdown contributed to a decline in stock markets around the world. US stocks sank as Wall Street worried that the budget fight could lead to something much worse for the economy - a failure to raise the nation's borrowing limit.
Whether or not Congress averts a shutdown, Republicans are sure to move the healthcare fight to a must-do measure looming in mid-October to increase the borrowing cap. The US risks a market-rattling, first-ever default on its obligations if Congress fails to raise that limit.
Both a shutdown and a default would be politically risky ahead of next year's congressional elections.
Some Republican leaders fear the public will blame their party for a shutdown if they insist on crippling healthcare reform. But individual House members may face a greater risk by embracing a compromise. Many represent heavily partisan congressional districts, and voters in primaries have ousted politicians, particularly Republicans, they see as too moderate.
Since the last government shutdown in 1995/96, temporary funding bills have been non-controversial, with neither party willing to chance a shutdown to achieve legislative goals it could not otherwise win.
But with the three-year-old healthcare law nearing implementation, hardcore tea party conservatives are determined to block it.
There are few issues Republicans feel as passionately about as the healthcare reform, which they have dubbed "Obamacare". They see the plan, intended to provide coverage for the millions of Americans now uninsured, as wasteful and restricting freedom by requiring most Americans to have insurance.
A crucial part of the plan will begin tomorrow, whether or not the government partially closes: enrolment in new healthcare exchanges for millions of Americans. That is because most of the programme is paid from money not subject to congressional appropriations.
House Republican leaders met in Speaker John Boehner's office to plan their next move. Officials said that even though time was running short, they expected at least one more attempt to squeeze a concession from the White House, probably a demand to force a one-year delay in the requirement for individuals to purchase health coverage or face financial penalties.
Republican unity over their strategy showed unmistakable signs of fraying as the deadline neared. Several Republican senators and House members said they would be willing to vote for straightforward legislation that would keep the government functioning, with no healthcare-related provisions.
"We haven't given up on Obamacare ... but for this week we may have to give up," said Republican Representative Doug Lamborn.
Mr Obama later ramped up pressure on Republicans to avoid a post-midnight government shutdown. He said a shutdown would hurt the economy and hundreds of thousands of government workers.
Mr Obama said it would "throw a wrench into the gears" of a recovering economy.
He urged the House to pass a short-term spending bill free of any conditions that would weaken the nation's three-year-old health care law.