The Central European University (CEU) found itself in the eye of a political storm after Hungary's parliament passed a law last month setting tougher conditions for the awarding of licenses to foreign-based universities.
The law has triggered a series of street protests - the most recent on Sunday - against Prime Minister Viktor Orban's right-wing government less than a year before a parliamentary election.
Orban had proposed talks with the US about the law, saying the reforms were meant to level the playing field for all universities in Hungary. But Tuesday's response dashed any prospect of a compromise through talks with Washington.