"There is no progress", Lithuanian President Dalia Grybauskaite told Reuters after the dinner.
British prime minister Theresa May arrives at the informal European Union summit in Salzburg.
He added: "We can't exclude a no deal".
The EU criticized proposals within May's Chequers plan at the summit on Tuesday, warning that they needed to be "reworked and further negotiated".
There are fears it could take an hour to process a lorry after Brexit
After dining on Wiener Schnitzel and wrangling over Europe's migrant problem, May was given the floor and tried to win over her 27 peers by asking them what they would do if they were asked to agree a "legal separation" of their countries.
A British government source said London welcomed the EU's commitment to finding a solution to the border issue, but could not accept any proposal that would effectively move the customs frontier into the Irish Sea.
The UK vehicle industry has demanded Brexit negotiators rule out a "no-deal" scenario immediately, to avoid costly damage to the sector across Europe.
The Prime Minister set out her blueprint over dinner with fellow leaders in Salzburg after being told by European Union chiefs that significant elements of it would have to be reworked.
OCTOBER will be the "moment of truth", Michel Barnier has insisted.More news: Imran Khan performs Umrah in Saudi Arabia
Tusk said he would call an additional summit in mid-November to seal any deal with Britain. May's ruling Conservative Party relies on the support of the Northern Irish DUP.
The Democratic Unionist Party, which props up May's minority administration in Parliament, dismissed Mr Barnier's proposals as unpalatable, because they would involve a customs border between Northern Ireland and the rest of the UK.
EU Council president Donald Tusk is alleged to have shut down any opportunity for debate and insisted the heads of state will discuss their response without her present.
Brussels has baulked at May's proposals for a future customs arrangement and for Northern Ireland.
Speaking at a news conference in Brussels, Barnier said: 'It is then we shall see whether agreement we are hoping for is in our grasp.More news: Shark victim was on annual Whitsundays holiday
Austrian Chancellor Sebastian Kurz, the host of the Salzburg summit, backed May in saying that "both sides need to compromise".
"No. It is a set of technical controls and checks, a lot of which, most, can be put in place and carried out in places other than physically in Northern Ireland", Barnier said.
According to an European Union official, Barnier has suggested going to the "bare bones" on any checks between the rest of Britain and Northern Ireland, which could be further reduced if there is a trade facilitation agreement similar to that with Japan. "Just think of all the people everyday who cross the border to work or study, think of all the businesses who trade across the border, so that's what we're trying to engineer in many ways, is a new relationship that at least when it comes to those matters, is very much like the one we have now, but that's hard to do".More news: Galaxy A7 (2018) is Samsung\'s first triple-rear-cam phone