The proposed co-regulation system would put Ofcom, the new super-regulatory body, in overall charge of broadcast advertising, but day-to-day responsibility could be devolved to the ad industry.
AA leaders are expected to meet Department of Culture, Media and Sport officials to persuade the Government to think again, but there are growing signs that the two sides are facing a deadlock.
Ministers are frustrated that the advertising world has not produced firm proposals for self-regulation. But the AA is refusing to do so until the Government agrees to the ad industry's right to draw up, enforce and amend the code.
Sara Soltani, the director of public affairs at the AA, said: "The Government appears to believe that co-regulation is simply a mechanism for transferring regulatory costs to the industry without any transfer of authority."
The AA is also concerned that the Government's plans to set up a consumer panel with a role on content could scupper plans to streamline the system under Ofcom.