Brussels has offered Britain an "emergency brake" mechanism to limit surges of young people coming to the UK under a new youth mobility arrangement.
Westminster and the EU are currently at loggerheads over the UK's insistence that the programme feature a cap on the number of entrants in a bid to quell fears of surging immigration levels.
The bloc has so far rejected London's calls for an upper limit.
However, one European Union official indicated a potential compromise allowing either side to halt the issuing of youth visas should participant numbers become unacceptably elevated.
"It's about the management of flows rather than an upfront number," the EU official said.
"It would be a monitoring system to ensure both sides are equally satisfied with the way the scheme is operating."
Nevertheless, British officials involved in the discussions described the emergency brake concept as a "non-starter", maintaining that Westminster will demand a numerical ceiling before any programme commences.
The dispute threatens to cast a shadow over a major summit between Sir Keir Starmer and European leadership planned for late June or early July.
The EU has so far rejected London's calls for a cap on the scheme
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European Union figures regard the proposed "youth experience scheme" for individuals under 30 as a means of rebuilding connections between young British citizens and the continent following the Brexit referendum nearly ten years ago.
A European Union source stated: "This is really a very strategic endeavour.
"The strategy is about ensuring that our societies keep linked, understand each other and see each other as part of the same family of nations.
"This is something that is really needed in these troubled times."
The source added: "If Europe has to stand together, it has to feel a common sense of purpose when it comes to international relations and democracy.
"Ensuring that our young people can travel to each other's countries, work, study in each other's countries is an important part of that."
Brussels fears that imposing a cap would damage a programme designed to strengthen positive relations between Britain and the bloc.
Senior EU sources have stressed the initiative should not be classified as a migration programme.
Sir Keir has demanded the arrangement must feature "appropriate time-limits, caps and visa requirements".
The Prime Minister and his administration remain committed to establishing a firm annual ceiling running into the tens of thousands.
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Brussels fears a cap would damage a programme designed to strengthen positive relations between Britain and the bloc
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Whitehall sources indicated that proposals lacking a definitive numerical limit would prove unacceptable to either the Home Office, which oversees migration policy, or the Foreign Office.
Government officials have drawn parallels with a comparable arrangement operating with Australia, which features a ceiling of 45,000 participants.
Nick Thomas-Symonds, Britain's EU relations minister, said at the outset of discussions "we have agreed that any scheme will be capped as well as time limited".
He indicated the framework would mirror youth mobility arrangements already established with 13 countries outside the European Union, including Australia, Canada, Japan and New Zealand.
A separate disagreement has emerged over university tuition charges, with European negotiators seeking to secure home fee status for bloc students studying at British institutions.
London has rebuffed this proposal, which would see EU participants paying the domestic rate of £9,535 annually rather than higher international student fees.
The British university sector has argued it lacks the financial capacity to reduce charges for European students, who currently help subsidise home students through their higher fee payments.
The youth mobility arrangement represents one of three priority areas for closer cooperation being negotiated ahead of the summit.
Discussions on reduced barriers for agricultural and food trade, alongside energy matters including emissions trading, form the other two elements of the talks, which commenced following the initial EU-UK summit last May.
Both parties have indicated substantial agreement exists on the food safety and emissions components of the negotiations.
The cross-party UK Trade and Business Commission has recommended setting a first-year participant limit of 44,000 to avoid any impact on net migration figures.
This suggestion follows statistics showing that during 2024, Britain issued 24,400 youth mobility scheme visas to the 13 non-EU partner countries, whilst an estimated 68,495 UK citizens relocated to Australia, New Zealand and Canada alone, producing a net outflow exceeding 44,000 individuals.
A Government spokesman declined to provide detailed commentary on the continuing negotiations, but said: "We are working together with the EU to create a balanced youth experience scheme which will create new opportunities for young people to live, work, study and travel."
Labour MP Stella Creasy, chairwoman of the Labour Movement for Europe, argued: "This is a deal that will bring back freedoms young Brits from all backgrounds lost with Brexit, as well as boosting growth."