Mr Alatas said he had conveyed this to the United Nations secretary- general, Kofi Annan, during a meeting in New York on Thursday.
"For this aim, Indonesia is also ready to discuss the substantial elements of the special status for East Timor with Portugal, under the framework of the tripartite dialogue under the mediation of the UN secretary-general," he said.
Speaking after a meeting Abilio Araujo of the East Timor Foundation for Reconciliation and Development, Mr Alatas said that he had asked Mr Annan and his special envoy for East Timor, Jamsheed Marker, to present the proposal to Portugal.
"If necessary, the meeting could be held at the foreign ministers level and not just the senior officials level as in the previous meetings," Mr Alatas added.
The Indonesian President BJ Habibie is due to meet Bishop Carlos Belo, spiritual leader of the East Timor today, a day before the head of state is due to make a key policy address on human rights.
Bishop Belo, won the Nobel peace prize in 1996 along with self- exiled East Timorese leader Jose Ramos-Horta for their efforts in seeking a peaceful settlement in the territory.
Indonesia invaded East Timor in December 1975, ending an independence movement that rose from the ashes of a civil war in the wake of Portugal abandoning its colony the year before. Jakarta declared East Timor its 27th province in July 1976 in an act not recognised by the United Nations, which still regards Lisbon as being the administering power.
Indonesia, Portugal and the UN secretary-general have been carrying on tripartite talks with little results since the early 1980s in an effort to resolve East Timor's international status.
Mr Alatas said the Indonesian government believes that giving East Timor a special status is the real solution to the issue.
"If Portugal accepts the proposal, Indonesia is ready to discuss with it and the UN secretary-general the substantial elements of the autonomy to be given to East Timor," he said.
He further noted that Indonesia is ready to discuss its policies in making East Timor an autonomous region.
He explained that the autonomy to be given the province will cover a large area but will exclude foreign affairs, finance, and defence and security.
However, jailed East Timorese rebel leader Xanana Gusmao has rejected Jakarta's offers of special status or autonomy, saying only a referendum would solve the issue once and for all.Reuse content