In a televised speech on Thursday, Gen. Abdel-Fattah Burhan, the head of the military council announced that talks were suspended for three days.
The barricades were first erected last month at the start of sit-ins that grew from street protests demanding the ouster of longtime dictator Omar al-Bashir.
Sudan's military removed Bashir from power on April 11 after four months of large protests against the president and his iron-fisted rule.
The violence has cast a shadow on talks that had appeared on course to reach a deal on forming a joint military-civilian body to run the country for a three-year transition period until presidential elections.
Lt. Gen. Yasser al-Atta, a military spokesman, said the two sides will spend the next six months negotiating peace deals with rebel outfits across the country, who have always been at odds with the central government.
Sudan's military rulers have suspended talks with protest leaders to form a transitional body as they demanded protesters dismantle barricades set up around the capital, Khartoum.
Protesters gathered in the Abbassiya and Al-Arbaa districts, just across the Nile from the capital, with many chanting slogans against the military council, witnesses told AFP.
The Alliance for Freedom and Change, the group that is leading the protest movement and negotiating the transfer of power with the army rulers, said the move was "regretable".
Also on Wednesday, at least eight people were wounded by gunshots near a Khartoum sit-in, a spokesman for Sudan's protest movement and a witness said.
Demonstrators have vowed to continue to sit-in and march until the government is transitioned to 100 percent civilian rule.
Protest leader Khalid Omar Yousef downplayed the role of the proposed ruling council, insisting Sudan would have a powerful cabinet.
On Monday night, eight people were killed as unidentified forces attacked protesters around the sit-in square.
Ahmed Rabie, an SPA leader, said "the decision actually came as a surprise" to the opposition and warned that the military is likely making "an attempt to retract what had already been agreed upon".
"While they claimed that a third party was the one who did so, eyewitnesses confirmed that the party was in armed forces vehicles and in armed forces uniforms, so the military council must reveal this party".
"It seems that there is so much confusion within the military council", said Rabie, adding that there are probably those within the military council who disagree "among themselves as to whether they shall hand power over to civilians".
Tensions soared after Monday's shootings, which came a day after protesters blocked a key avenue in Khartoum, an action which the generals said was "totally unacceptable".
"Extremely concerned by use of live ammunition by Sudanese security forces against protesters in Khartoum today, with reports of civilian casualties", Irfan Siddiq wrote on Twitter on Wednesday.