Mr. Seehofer and Ms. Merkel have been at loggerheads for two weeks over the minister's insistence that federal police turn back at the border migrants with an open asylum application in another European Union member state.
Seehofer told party colleagues at an executive committee meeting on Sunday that discussions with Merkel had been fruitless, according to a party source.
Top CSU officials had said they wanted to stay in government with Mrs Merkel's CDU.
The 68-year-old is keeping Germany on tenterhooks over his next move that could potentially send the government crashing, after he offered to resign during a dramatic overnight crisis meeting with his Christian Social Union (CSU) before reversing his stance.
However, the more conservative CSU believes its credibility is at stake as it tries to curb support for the rival anti-migration Alternative for Germany party in the Bavarian election.
Merkel and Seehofer, who heads Bavaria's ruling Christian Social Union (CSU), pulled back from the brink as they risked a coalition split that could have unraveled Merkel's chancellorship after nearly 13 years. It was unclear whether this was high-risk brinkmanship aimed at making Ms. Merkel back down.
In addition, Knaus said, the emphasis on transit centres would mean Bavaria bearing most of the administrative burden of registering and processing refugees and migrants who arrive in Germany. "This is a hard basis for the rest of the legislature and poses at least a latent threat to the stability of the government", he said. Mr Seehofer was not there. They agreed on the tighter border control to prevent illegal immigration Seehofer was demanding.
Norwegian Getaway cruise ship crew member rescued from ocean off Cuba
Passengers on the Getaway said the ship's captain announced that they were turning the cruise liner around. She praised the crewmembers who found the man, lauding their "amazing effort to rescue a fellow seafarer".
The most important factor for her survival is probably how long her own CDU lawmakers stand by her, and for now they are.
German politicians who criticized the agreement say Merkel and her conservatives had abandoned the country's moral mission.
CDU general secretary Annegret Kramp-Karrenbauer said in Berlin party leaders were "united" behind "effective, humane solutions together with our European partners". "I am running out of patience".
After the Bavarians' relentless pressure on Merkel, European leaders on Friday agreed to new measures to reduce immigration to the bloc and so-called "secondary migration" of asylum-seekers between countries.
The chancellor's frantic last-minute diplomacy was ultimately prompted by the CSU's fear of losing its cherished absolute majority in Bavaria's state parliament.
"The CSU's immigration policy and its treatment to its sister party are only supported by a minority", Forsa head Manfred Güllner told the RTL/n-tv broadcaster, which commissioned the survey.
But he added: "She has made it her lot in life to be German chancellor".