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23 January 2012 Last updated at 12:31 GMT Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani says the Arab League wants to see stability and security
The league, meeting in Cairo, urged Syria to form a national unity government with the opposition within two months.
A government official called the plan "flagrant interference" in Syria's internal affairs, state TV said.
The UN says more than 5,000 people have died as a result of the crackdown on protests since they began last March.
The league called on both sides to end the bloodshed.
The government in Damascus says it is fighting "terrorists and armed gangs" and claims that some 2,000 members of the security forces have been killed.
Arab League split"Syria rejects the decisions taken which are outside an Arab working plan, and considers them an attack on its national sovereignty and a flagrant interference in internal affairs," the unnamed Syrian official said.
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Jeremy Bowen BBC Middle East editor, Homs The Arab League is essentially asking President Assad to give up power, to just step aside.
Everything he has said since all this began suggests that is something he does not want to do.
Diplomatically speaking there isn't really a game at the moment.
It means that the various initiatives that have been tried over a period of months culminating in the one from the Arab League have got precisely nowhere.
The Arab League is increasingly split, disunited, rancorous about what exactly is to be done about Syria.
Its initiative that seemed to start with quite a lot of unanimity at the end of last year is looking in tatters.
On a government trip to the embattled city of Homs, we've been shown the burnt remains of bodies in a morgue after what soldiers described as an ambush on Sunday morning that killed 11 troops.
The official said the Arab League proposals were not in the interests of the Syrian people and would not prevent the country from "advancing its political reforms and bringing security and stability to its people".Saudi Arabia said it was pulling out of the league's 165-strong monitoring mission in Syria because Damascus had broken promises on peace initiatives.
While the Arab League ministers said they were extending the controversial mission for another month, analysts say the Saudi decision has thrown its longer-term future into doubt.
Saudi Arabia is one of the key funders of the league's projects, but the monitors have been criticised for failing to stop the violence.
Speaking in Cairo on Monday, the head of the monitors, Sudanese General Mohammed al-Dabi, defended the mission.
He said the monitors were in Syria to observe implementation of an Arab League plan to end the violence, and indeed, despite some shootings and explosions they had seen the situation improve while they were there.
The Arab League is now increasingly split over what could be done to resolve the Syrian crisis, the BBC Middle East editor Jeremy Bowen in Syria reports.
With the Syrians rejecting the conditions of the initiative, the Arab League's roadmap is effectively in tatters, our correspondent says.
Jeremy Bowen met pro-Assad supporters at a demo in DamascusMeanwhile, violence has continued in Syria, with activists reporting battles between government troops and army defectors in the Damascus suburb of Douma on Sunday.
At least five people were killed there, according to Syria's Local Coordination Committees (LCC), as well as seven other people in other parts of the country.
Authorities in the city of Homs told our correspondent that 11 soldiers had been killed in an ambush on Sunday, while a doctor at a military hospital in the embattled city said five dead soldiers had been brought in on Monday.
Activists say almost 1,000 people have been killed since the monitoring mission began in December.
Continue reading the main story More than 5,000 civilians killed since March, says the UNUN denied access to SyriaInformation gathered from NGOs, sources in Syria and Syrians who have fledVast majority of casualties were unarmed, but the figure may include armed defectorsTally does not include serving members of the security forcesSource: UN's OHCHR
'No military intervention' At the Arab League meeting, Saudi Foreign Minister Prince Saud al-Faisal urged the international community to step in and put pressure on Damascus.The meeting of Arab League foreign ministers called on President Assad to delegate power to one of his vice-presidents and to engage in proper dialogue with the opposition within two weeks, and form a government of national unity in two months.
It was not clear which vice-president, Farouk al-Shara or Najah al-Attar, the Arab League had in mind to assume power.
The league said this should eventually lead to multi-party elections overseen by international observers.
Qatar's Prime Minister, who is also foreign minister, Sheikh Hamad bin Jassim al-Thani, said the league would seek the support of the UN Security Council for the changes.
But he added: "We're not talking about military intervention."
Mohammed al-Dabi, Arab League monitoring mission: Events in Syria are 'unacceptable'Speaking before an EU foreign ministers meeting in Brussels, British Foreign Secretary William Hague said a Security Council resolution on Syria was overdue and it had been a mistake for China and Russia to have blocked a previous attempt at one.
The EU foreign ministers called on President Assad to "step aside immediately to allow for a peaceful and democratic transition".
They also agreed on new sanctions against 22 Syrian officials accused of human rights abuses and eight companies that financially support the Assad regime, hitting them with travel bans and a freeze of assets.
Existing EU sanctions include an arms embargo, a ban on the import of Syrian crude oil and a ban on new investment in the Syrian petroleum sector.
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