The US House speaker, Nancy Pelosi, postponed a planned vote on a $1tn infrastructure bill on Thursday night in a stinging defeat for Democrats after progressives revolted, withholding their support until an agreement could be reached to enact the full sweep of Joe Biden’s economic vision.

The decision capped a frantic day of negotiations in Washington that stretched late into the evening, as the president and Democratic leaders attempted to break a stalemate between a handful of moderates, who pushed for the infrastructure vote, and progressives who believe it would be insufficient without a broader, $3.5tn social policy package.

“A great deal of progress has been made this week, and we are closer to an agreement than ever,” said the White House press secretary, Jen Psaki, after the House announced there would not be a vote on Thursday. “But we are not there yet, and so we will need some additional time to finish the work, starting tomorrow morning first thing.”

Democrats insisted that the setback was temporary, but the delay underscored the fragile state of the negotiations as a pair of Senate holdouts demanded the president dramatically shrink the more expansive legislation containing many of the party’s top policy priorities. The House was slated to reconvene on Friday, giving Democrats at least another day to attempt to reach an agreement that would satisfy the feuding factions.

Both pieces are critical to Biden’s economic vision. He spent weeks personally courting Republican senators to secure a bipartisan victory on the infrastructure bill, which would invest $1tn in upgrading roads, bridges and broadband. But he has staked his presidency – and his legacy – on the passage of the mammoth social policy bill that would expand healthcare, make childcare more affordable, establish paid federal leave and combat the climate crisis, paid for by tax increases on wealthy Americans and corporations.

In a vaguely worded letter to colleagues on Thursday night, Pelosi called it a “day of progress”.

“Discussions continue with the House, Senate and White House to reach a bicameral framework agreement to Build Back Better through a reconciliation bill,” she wrote.

“All of this momentum brings us closer to shaping the reconciliation bill in a manner that will pass the House and Senate,” she said, concluding the letter with the promise: “More to follow.”

The delayed vote was a significant blow for Pelosi, a self-described master negotiator who insisted earlier that Democrats were “on the path to win” the infrastructure vote. “This is the fun part,” she boasted to reporters on Thursday, referring to the final, chaotic stretch before securing a major legislative achievement.

Yet with only three votes to spare, and Republicans largely opposed, Pelosi was unable to untangle the competing promises made to progressives and centrists in time to vote on Thursday.

In an effort to placate a small band of centrist Democrats, Pelosi promised to bring the infrastructure bill to the House floor for a vote this week. But progressives had long maintained that they would only support that bill if it passed in tandem with the far more expansive $3.5tn package.

When it became clear on Thursday that the Senate was not prepared to pass the legislation as written, progressives stood by their threat to tank the infrastructure bill, which they saw as leverage for ensuring Biden’s entire economic vision was enacted.

The fate of Biden’s agenda remains in limbo, and with Democrats deeply at odds, it was unclear on Thursday night how they planned to progress.

The terms of the negotiations were largely driven by two Democratic holdouts in the Senate, who are opposed to the current size of the spending package. On Thursday, Senator Joe Manchin of West Virginia said he would not support a spending package that exceeded $1.5tn, less than half of the size of the proposal being pushed by Biden and most of the Democratic party.

Amid the negotiations and with only hours to spare, Congress passed legislation to avert a government shutdown at midnight on Thursday, with Biden later signing a measure that would fund the federal government through 3 December.

The measure was passed by the House and Senate with bipartisan support, though a significant number of Republicans voted against it.