Not even the pope would be able to help the Ngāpuhi settlement, Treaty Minister Chris Finlayson says.
Mr Finlayson said the discussions between Tūhoronuku and Te Kotahitanga - two opposing groups representing iwi members - had reached a stalemate.
"In my experience the more people you send in there to try and help, the more difficult it is, I could send Pope Francis in there and he'd get nowhere either."
Members of Tūhoronuku and Te Kotahitanga met with Prime Minister Bill English at the weekend, and were told they had to sort out their disputes themselves without any help from the government.
The Treaty Minister and the Office for Treaty Settlements will be removed from the Ngāpuhi treaty settlement process and a mediator will be appointed.
Former Māori Affairs Minister Dover Samuels is a claimant, and said he did not blame the government for walking away.
He believed this would cast the settlement back light years, causing Ngāpuhi to lose opportunities to advance its people.
"The claimants want to get on with the claim, and there is frustration, the mana-munching between the two groups is prohibiting the claim from moving forward and we are losing out on opportunities for our young and old to move forward."
Mr Finlayson said until Ngāpuhi members said enough was enough and wanted to get on with it, this would be the current state of affairs.
Ngāpuhi is the biggest and poorest iwi in the country.
Three years ago, the Crown officially recognised Tūhoronuku as having secured a mandate to negotiate the treaty grievance on behalf of the people of Ngāpuhi.
The Waitangi Tribunal then found Tūhoronuku was not fit to settle the iwi's claim, after a number of people went to it with concerns over the mandate.
Following this, the Crown brought together both Tūhoronuku, who holds the mandate, and Te Kotahitanga to restructure the mandated group.
Their report, 'Maranga Mai', was rubber-stamped by Mr Finlayson and for nearly a year the two groups had been working on a pathway forward.
Te Kotahitanga said the government had thrown a spanner in the works and it was on the cusp of bringing Ngāpuhi together, but Tūhoronuku said it was pleased the government did not accept the new model that had been under discussion.