An official, quoted on state television, apparently called the transfer plan which asked for President Assad to delegate power to his Vice President a "flagrant interference".
The Arab League had also called for a national unity government to be formed within two months, followed by multi-party elections overseen by international observers.
Its chief, Nabil Elaraby, said Syria had only carried out some of its promises so far and that the use of extreme force by the rulers "could lead to civil war".
But the Syrian official said: "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."
State television reported that the spokesman said the Arab League should instead "assume its responsibilities for stopping the financing and arming of terrorists".
The official claimed the Arab League initiative was against the interests of the Syrian people and would not stop the country from "advancing its political reforms and bringing security and stability to its people who have shown, during this crisis, their support for national unity as they have rallied around President Assad."
Arab League monitors have been deployed in Syria since December 26 in what is supposed to be the first step toward implementing a peace plan.
But the mission has been criticised for its failure to stem the government's bloody crackdown on pro-democracy protesters.
The Local Coordination Committee activists group says 976 people, including 54 children and 28 women, have been killed since the operation began a month ago.
The UN estimates some 5,400 people have been killed since the violence first began in March.
The Arab League has now agreed to extend the controversial project and increase the number of observers but its work has been thrown into doubt by the withdrawal on Sunday of Saudi Arabia.
Saudi Foreign Minister Saud al-Faisal said his country will pull out its observers because "the Syrian government did not implement the Arab plan."
He urged Muslim countries, China, Russia, Europe and the US to put pressure on Assad's government to stop the violence.
Saudi Arabia has been one of the harshest Arab critics of the crackdown and recalled its ambassador from Damascus last year in protest.
Syrian forces and army defectors clashed in a Damascus suburb on Sunday, fuelling fears the uprising is now heading towards an armed conflict.
Diplomacy has taken on urgency as opponents of Assad's regime and soldiers who switched sides increasingly take up arms and fight back against government forces.
The British-based Syrian Observatory for Human Rights said Syrian troops had opened fire at a funeral on Saturday, sparking hours of clashes in Douma in Damascus.
The LCC and the Observatory also reported intense gunfire in the central city of Homs and said at least one person had been killed.
Syria, keen to avoid tougher foreign action, has tried to show it is complying with the Arab peace plan, which demanded a halt to killings, a military pullout from the streets, the release of detainees, access for the monitors and the media, and a political dialogue with opposition groups.
This month, the authorities have freed hundreds of detainees, announced an amnesty, struck a ceasefire deal with armed rebels in one town, allowed the Arab observers into some troublespots and admitted some foreign journalists.
President Assad also promised political reforms, while vowing iron-fisted treatment of the "terrorists" trying to topple him.
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