The Moderate Party is the biggest opposition party, and is now calling for the plans to be abandoned all together. The party's representative at the talks, Andreas Norlén, tells Swedish Radio news that the Moderates are pulling out because the government has not met demand that the people living in the regions will have a say, before the plans go ahead.
Already on Tuesday, the Liberals pulled out of the negotiations.
The government is now hoping to strike a deal with the Centre Party and the Left Party, reports news agency TT, and negotiations are set to continue on Thursday.
There are currently three larger regions in Sweden, centred around the big cities Stockholm, Gothenburg and Malmö, plus 16 small regions, the "län". Over the years, there have been numerous proposals to try to make the administrative bodies in the country more equal in strength and population.
The government originally said that it wants three new regions from 2019, Norrland in the north, Svealand at the centre and Götaland in the south. But on Wednesday, the Minister for Public Administration, Ardalan Shekarabi announced that he has dropped the plans for a greater region in the north.
Anders Norlén of the Moderate Party told Swedish Radio News that he thinks a change as big as this needs a broad support in parliament, as it will change the forms of democratic decision making in the regions.
"We only change the rules of democracy in Sweden if we have a broad agreement. There clearly isn't a broad support for this, and I think the government should drop the issue," he said.