Israeli officials have said work would continue on 2,500 settler homes being built in the occupied territory. This falls short of Palestinian President Mahmoud Abbas's conditions for resuming talks on establishing a Palestinian state.

"They (Americans) asked us for a complete freeze and we told them that we will not do this," Mr Netanyahu was quoted as saying by a parliamentary official, who briefed reporters on his comments to the Foreign Affairs and Defence Committee.

"I told the Americans we would consider reducing the scope of construction," the premier said, according to the official.

Israel Radio quoted Netanyahu, who heads a right-leaning government, as saying any construction restrictions would be in effect only for a limited time, but said he gave no timeframe.

AFP