Benitez has been in charge at Anfield since June 2004
Liverpool manager Rafael Benitez has rejected the Anfield club's latest contract offer, BBC Sport understands.
Benitez, 48, says he will only accept the deal if he gains more control over football matters instead of having to answer to chief executive Rick Parry.
"The owners feel (my) decisions need to be subject to the chief executive," Benitez told the Liverpool Echo.
"But I know that I am subject to results and to our fans and they are the best judges I will ever have."
Benitez, who has agreed the financial terms and length of the proposed contract, has informed the club's American owners Tom Hicks and George Gillett of his stand.
The Spaniard insists he has a strong relationship with the co-owners but says that the deal on offer would not allow him to manage football matters at Liverpool to the best of his abilities.
I will continue to do my job as manager and concentrate on the thing that our fans want me to focus on - winning trophies for them
Rafael Benitez
"My relationship with the owners is better than people think," he said. "I have regular contact with them and especially with Tom Hicks who has always been very supportive.
"The talks between my agent and the advisers of the owners have been very positive and friendly and our differences are about my responsibilities.
"I have a lot of experience in football at different clubs and if you do not have a technical director and you are the manager you have to have control of the football decisions.
"But always within the confines of a budget which is controlled by the owners and the club.
"In this scenario the manager knows the amount money he has available to him and can decide how much he should spend on each player according to the needs of the team.
"The only person who can decide the value of a player to his squad is the manager because he knows what elements are needed to improve the squad."
Benitez says he does not want to answer to Rick Parry
Hicks moved swiftly to reassure supporters that Benitez will remain manager for the next five years, insisting he has no concerns about the rejected contract.
"I will be working with Rafa to get this resolved - and I am just not worried about it at all," Hicks told Sky Sport News.
"Rafa is going to be coach of Liverpool for the next five years, and we will work through all this."
Benitez, whose current four-year deal expires in 2010, expressed frustration that he has not had the level of control he would like over the club's Kirkby-based academy.
"I believe the academy is a very important part of the future of the club. The length of the contract was already agreed and this showed my long term commitment to the club," he said.
"I know the academies of Ajax, Real Madrid, Barcelona, AC Milan and Valencia and they are producing players regularly.
"The way the system works there means the manager has an input into development and I think this could be the way forward here and we would hope that this would help us make better use of local talent."
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