The five-day conference in the capital Naypyidaw has been hailed as the best chance in a generation for Myanmar to end wars that have raged for up to 70-years, claiming thousands of lives and keeping the country mired in poverty.
Among the militias attending is the powerful 20,000-strong United Wa State Army.
They stopped fighting the government years back in exchange for control of a remote portion of territory bordering China which is now a notorious drug manufacturing hub.
But they eventually agreed to attend following discussions last month with de facto leader Aung San Suu Kyi and after pressure was applied by China, which retains significant influence over the group.
Yet on day two of the talks four UWSA delegates walked out, officials said, reportedly after being told they could not address the gathering.
Government peace negotiator Khin Zaw Oo said the Wa had been given observer badges, instead of ones allowing them to speak, angering their delegation.
A spokesman for the Wa militia told the Democratic Voice of Burma the group left after being told they were only accredited as observers, calling it discrimination.
But Lian Hmung Sahkong, from the Chin National Front, another ethnic group at the talks, denied the Wa were treated unfairly.
"We give equal rights to them and gave them a front row seat. I would like to confirm again that we did what they demanded," he said.
Suu Kyi has been informed of the episode and "gave instructions that the peace process not be harmed because of this case", government spokesman Zaw Htay told reporters, without elaborating.
Several complex ethic conflicts are rumbling across Myanmar's borderlands, hampering efforts to build the country's economy after the end of junta rule.
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