In the first major bust-up regarding the next stage of negotiations, the Brexit Secretary complained the proposals were “not in good faith”.
He said the talks were meant to be about “building a bridge” but that instead Brussels had come up with a “political document” that “is not the aim of this exercise”.
Mr Davis was responding to a draft EU paper that suggested suspending Britain’s access to the single market in the event of a dispute between the two sides during the transition.
Negotiators agree there should be an “implementation period” of about two years – but that the UK’s formal membership will expire when Article 50 runs out in March 2019.
Mr Davis said on Thursday: “I do not think it was in good faith to publish a document with, frankly, discourteous language and actually implying that they could arbitrarily terminate in effect the implementation period.
“That’s not what the aim of this exercise is, it’s not in good faith and we think it was unwise to publish it.”
He was speaking following day two of Theresa May’s Brexit war cabinet, which saw ministers thrash out ideas for what the UK’s future relationship with the EU should be.
Mr Davis called the atmosphere “very constructive”, admitting there were “still things incomplete” but that “a great deal of progress has been made”.
The Brexit Secretary also played down the Government’s own impact assessment leaked to Sky News that showed regions in the UK could suffer a hit to GDP of up to 16% over 15 years.
It comes as hard Brexiteer Tory MPs rally round Theresa May for promising to be “robust” in the face of “noises off” from Brussels.
But she still faces pressure from the opposite wing of her party to publish the Brexit impact assessment, now that some of its content has been made public.
Tory MP Sarah Wollaston posted on Twitter on Thursday: “Again, no excuse for Government refusing to publish the latest tranche of financial Brexit impact papers.
“It’s a depressingly short read with nothing that could possibly justify the secrecy.”
A Downing Street source said: “The PM told the Brexit cabinet that the government had to be ambitious in the deal we seek.
“She said her starting point was to aim for something that hadn’t been done before in order to come to a new relationship that will last a generation or more.
“Her approach is to seek a deal that is bold, in the best interests of the UK and that will carry widespread support.”