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 have said.
They said the deal stipulates that Israel stops settlement construction for 90 days in the West Bank, but the moratorium does not apply to east Jerusalem.
The US will not ask Israel to extend the new moratorium when it expires, 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.
Palestinian negotiator Saeb Erekat did not reject the proposal outright, but said 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".
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 has begun since then.
Diplomats said the incentive package includes US commitments to fight international resolutions critical of Israel. In addition, the US Congress would be asked to supply 20 F-35 stealth fighter jets to Israel in a £1.9 billion deal.
Israeli PM Benjamin Netanyahu, who met US Secretary of State Hilary Clinton and other Washington officials last week, convened a meeting of his inner cabinet on Saturday night to brief members on the package.