The Ulster Unionist leader, Mr David Trimble, has confirmed reports that secret talks have been taking place between the Orange Order and Garvaghy Road nationalist residents over Drumcree.
However, Mr Trimble dismissed speculation that a breakthrough in the dispute was imminent as "too optimistic".
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There had been rumours of meetings between the local Orange lodge in Portadown and residents, in contravention of the standoff policy operated by the Grand Orange Lodge of Ireland.
Mr Trimble also accused nationalists of being reluctant to engage in serious negotiations.
"Conversations and attempts that were being made several weeks ago have not made as much progress as we would have liked for the usual reasons," he said.
"Namely there is a reluctance on the part of representatives of the Garvaghy Road Residents Coalition to engage in any serious discussions with anybody."
The Parades Commission announced on Monday that it was refusing permission for the Orange Order to march along the Garvaghy Road in Portadown, Co Armagh.
The order has been banned from completing its parade from its church service back to the lodge in Portadown since 1998 amid fears of civil unrest and because residents affected had not been consulted.