Israel has offered a peace deal to the Palestinians which would annex 7.3% of the West Bank and keep the largest settlements, Israeli reports say.
In return the Palestinians would be given land equivalent to 5.4% of the West Bank in the Negev desert, the Israeli newspaper Haaretz reported.
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The two sides have been in peace talks sponsored by the US since November.
Israel wants the new border between it and the West Bank to be similar to the route of the barrier it is currently building in and around the territory, Haaretz reports.
Haaretz says the proposed deal also covers refugees and security arrangements, but not the contentious issue of East Jerusalem and the ring of settlements around it.
Wide gap
A spokesman for Palestinian leader Mahmoud Abbas, Nabil Abu Rudeina, said the proposal is not new, but had been presented by the Israel earlier in the year.
"The only subject that was discussed seriously was the borders but we never reached an agreement. The gap is still as wide as ever," Mr Abu Rudeineh told the BBC.
About half a million Israelis live among 2.5 million Palestinians in settlements in the West Bank and East Jerusalem, land that was occupied by Israel in the 1967 war.
On Monday, top Palestinian negotiator Ahmed Qurei said Israel's strategy in negotiations could force the Palestinians to abandon their goal of a two-state deal and instead seek a binational solution, that is a single state for Israelis and Palestinians in Israel, the West Bank and Gaza.
The US has set a deadline of before US President George W Bush leaves office next January for a peace deal to hammered out.
Prime Minister Ehud Olmert plans to resign in the coming weeks as he fights multiple corruption allegations against him.
The US got behind the two-state formula in 2002, but subsequently it also supported Israel's goal of retaining land beyond the 1967 borders where Israel has settled large populations of its citizens.
(BBC)
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