An EU official, who asked not to be identified because the negotiations were still ongoing, said "discussions continued until late in the night and will continue today".

Both sides were hoping that after more than three years of false starts and sudden reversals, a clean divorce deal for Britain leaving the bloc might be sketched out in the coming hours.

Thursday's EU leaders' summit comes just two weeks before Britain's scheduled departure date of October 31.

Even though many questions remain, diplomats made it clear that both sides were within touching distance of a deal for the first time since a UK withdrawal plan fell apart in the British House of Commons in March.

Still, talks that first lingered deep into Tuesday night saw no deal materialising between experts from both sides holed up at EU headquarters in Brussels.

This week's EU leaders' meeting - the last scheduled summit before the Brexit deadline - was long considered the last opportunity to approve a divorce agreement.

British Prime Minister Boris Johnson insists his country will leave at the end of the month with or without an agreement, although UK MPs are determined to push for another delay rather than risk a chaotic no-deal Brexit.

The EU's chief Brexit negotiator, Michel Barnier, said at a meeting of the bloc's ministers in Luxembourg on Tuesday that the main challenge now was to turn the new British proposals on the complex Irish border issue into something legally binding.

EU member Ireland has a land border with the UK's Northern Ireland and both want to keep goods and people flowing freely across the island.

Australian Associated Press