DUBAI (Reuters) - Yemeni government negotiators said they were leaving peace talks in Kuwait on Monday after Houthi militia foes rejected a United Nations proposal aimed to ending their country's war.

Foreign Minister Abdel-Malek al-Mekhlafi insisted the government was not abandoning the peace process, but suggested it would only return if the Houthis and a powerful local ally lifted their objections to the UN plan.

"We've agreed to the initiative ... we are now leaving the territory of the brotherly state of Kuwait but we're not leaving the talks," Mekhlafi said while announcing the move.

"We'll return at any moment, even an hour after our departure, if the other side agrees to sign this document which the (U.N.) envoy presented."

U.N. envoy Ismail Ould Cheikh Ahmed proposed that the government's foes in the armed Houthi movement quit three main cities they hold, including the capital Sanaa. Under this plan, new talks would then be convened on forming a government that would include the Houthis, delegates said.

The envoy said in a statement the talks would continue. "The departure of the Government of Yemen delegation from Kuwait is not a departure from the Peace Talks," Ould Cheikh Ahmed said.

"We agreed with the parties to keep the talks ongoing until we agree on next steps in the coming days which shall be dedicated to intensive meetings" with the government's foes as well as international diplomats, he said.

The Houthis dismissed the U.N. proposal as a non-starter on Sunday, saying in a statement that any agreement would need to be comprehensive and not postpone a resolution on major issues.

They said they would stay in Kuwait for the talks.

The negotiations started in April have slowed the nationwide fighting that has killed at least 6,400 people and caused one of the world's worst humanitarian crises.

(Reporting By Noah Browning and Mohammed Ghobari; Editing by William Maclean and Tom Heneghan)