Republican leaders in the House of Representatives told their members to be back in Washington from the Christmas holiday break on Sunday night in case they need to vote on budget measures.
That leaves the door open to a last-minute solution to avert big tax hikes due to begin on January 1 and deep, automatic government spending cuts set to begin on January 2 – together worth $600 billion – that could push the US back into recession.
But the two political parties remained far apart, particularly over plans to increase taxes on the wealthiest Americans to help close the U.S. budget deficit.
"Hopefully, there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis," Mitch McConnell, the top Republican in the Democratic-controlled Senate, said. However, Mr McConnell warned that Senate Republicans "aren't about to write a blank check for anything Senate Democrats put forward just because we find ourselves at the edge of the cliff."
US stocks sharply cut losses after news of the House reconvening as investors clung to hopes of an 11th-hour deal.
Earlier in the day, Senate Majority Leader Harry Reid, the top Democrat in Congress, warned the US looked to be headed over the fiscal cliff.
"It looks like that is where we're headed," he said on the Senate floor, blaming Republicans for the impasse in talks. He called on the Republicans who control the House to prevent the worst of the fiscal shock by getting behind a Senate bill to extend existing tax cuts for all except those households earning more than $250,000 a year.
With the clock ticking toward the deadline for action, Mr Reid offered little hope.
"I don't know time-wise how it can happen now," he said.
Referring to the House run by Speaker John Boehner – the top Republican in Congress – Mr Reid said: "It's being operated with a dictatorship of the speaker, not allowing a vast majority of the House of Representatives to get what they want."
Mr Reid also also accused Mr Boehner of delaying "fiscal cliff" action until after he seeks re-election as House speaker on January 3.
"John Boehner seems to care more about keeping his speakership than about keeping the nation on firm financial footing," Mr Reid added.
President Barack Obama arrived back at the White House from a brief vacation in Hawaii to try to restart stalled negotiations with Congress.
The House and Senate passed bills months ago reflecting their own sharply divergent positions on the expiring low tax rates, which went into effect during the administration of Republican former president George W Bush.
Democrats want to allow the tax cuts to expire on the wealthiest Americans and leave them in place for everyone else. Republicans want to extend the tax cuts for everyone.
In another sign that Americans are increasingly worrying about their finances as Washington fails to fix the budget crisis, consumer confidence fell to a four-month low in December.