RAMALLAH, Feb 14 (Reuters) - Palestinian President Mahmoud Abbas has decided to disband the Negotiations Support Unit (NSU) which provided him with technical help during long-running peace talks with Israel, an official said on Monday.

The decision was made after it was discovered that employees in the unit were behind the leak of hundreds of documents to the television station al-Jazeera which embarrassed Abbas' administration.

The discovery prompted the resignation at the weekend of the chief Palestinian negotiator, Saeb Erekat, who said he was taking responsibility for the release of about 1,600 secret documents relating to more than a decade of peace maneuvers.

It was not immediately clear if Abbas had accepted his resignation, but an official said Erekat was adamant he would not return to his post.

The planned closure of the NSU and possible departure of Erekat marked a new low point in peace initiatives, with no sign whether Abbas wanted to rebuild his negotiating team.

The latest round of US-led peace negotiations broke down almost immediately after they started last September, with the Palestinians refusing to continue talks until the Israelis halted all settlement building on occupied territory.

Abbas reiterated on Monday that he would not back down unless Israel stopped these cancerous activities that are called settlements.

If Israel keeps refusing the terms of reference (for talks) we will not go back to negotiations at all, he said in a speech marking the Prophet Mohammed's birthday.

The NSU was set up in 1999 to give legal, communications and policy advice to Palestinian negotiators, and was partially funded by a number of European countries.

It has a 25-strong staff and came under scrutiny following al-Jazeera's publication of the so-called Palestine Papers. Palestinian intelligence staff questioned the employees and determined that three of them had been behind the leak.

The trio were believed to have left the West Bank.

The Palestine Papers showed Erekat and his fellow negotiators had made more concessions to the Israelis in private than had previously been made public.

Erekat, a veteran of some 20 years of largely fruitless peace talks, has said the documents were taken out of context and were meaningless given that the talks never led to a deal.

(Reporting by Mohammed Assadi and Crispian Balmer; editing by Andrew Dobbie)