Like many other would-be mediators, it appears FIFA is unlikely to reach a Middle East agreement.
But at the annual FIFA Congress on Wednesday, a day before the games begin, no accord was reached. Blatter said the talks have achieved some "positive results" and FIFA would continue to mediate.
The Palestinian Football Association has complained to Blatter about Israeli travel restrictions on some of their players in the West Bank as well as in the Gaza Strip, a territory ruled by the Palestinian Islamic militant group Hamas. The Palestinians have asked FIFA to suspend Israel if these are not lifted. Israel says the restrictions have nothing to do with sport, but with security.
Late last month, Blatter said he hoped an agreement would be "signed and sealed" before Thursday's opener.
Blatter ruled out the idea of sanctions against Israel. But he said that to implement a mechanism of free movement "we need, in FIFA, the full support of the Israeli government."
During his visit to the region last year, Blatter said he hoped a memorandum of understanding would be signed between the football associations and that the document be valid for a year — and would subsequently be extended.
On Wednesday, the head of the game's ruling body said: "There are some positives and we know that in one year we cannot sign an MOU."
Jibril Rajoub, the head of the Palestine Football Association, took to the floor to condemn Israel and to thank Blatter for his support.
"To those who are suffering, don't lose hope — your big family FIFA is with you," he said.
The previous day, Israeli Sport Minister Limor Livnat wrote to Blatter to defend her country's actions and singled out the case of a Palestinian national team player whom Israel detained in late April on suspicion he met an Islamic Hamas militant during the team's training in Qatar.
Blatter, who says he is a "self-declared ambassador of the Palestine people," did not address the letter Wednesday.
Israel has cited concerns about possible attacks by Palestinian militants as the main reason for sweeping restrictions on movement that affect most Palestinians, including athletes.