The US has offered Israel an incentive package to reinstate a ban on West Bank settlement building, in an effort to revive stalled peace talks with the Palestinians, diplomatic sources said today.
The sources said the deal stipulated that Israel would stop settlement construction for 90 days in the West Bank, but the moratorium would not apply to east Jerusalem.
The US would not ask Israel to extend the new moratorium when it expired, the sources said.
The US-brokered talks between Israel and the Palestinians resumed in September after a nearly two-year hiatus, but quickly stalled over the issue of settlement expansion.
The Palestinians say they will not resume peace talks until Israel stops building in the West Bank and east Jerusalem - territory they claim as parts of their future state.
Israel insists the issue of settlements will become null and void once final borders are agreed.
The three-month freeze proposed by the US includes new building that began at the end of September after a 10-month moratorium set by Israel to entice Palestinians back to talks expired. Work on hundreds of homes have begun since then.
Diplomats said today the incentive package included US commitments to fight international resolutions critical of Israel.
In addition, the diplomats said the US Congress would be asked to supply 20 F-35 stealth fighter jets to Israel in a £1.9 billion deal.
Israeli prime minister Benjamin Netanyahu, who met US secretary of state Hilary Clinton and other US officials last week, convened a meeting of his inner cabinet last night to brief members.
Israel drew criticism from the US and the European Union last week after new construction plans for apartments in Jewish neighbourhoods of east Jerusalem were released while Mr Netanyahu was meeting American officials.
Mr Netanyahu issued a statement at the time defending the plans, saying: "Jerusalem is not a settlement. It is the capital of the state of Israel."
Palestinians say construction there undermines the talks and if negotiations fail, they will consider sidestepping Israel and seek United Nations recognition of a Palestinian state.
Palestinian negotiator Saeb Erekat did not reject the proposal outright, but said today a decision on whether to endorse it would be made after consultations with Palestinian and Arab leaders.
Mr Erekat said the Palestinians "have a major problem in not including east Jerusalem".