Israel has quietly stopped approving new building projects in the West Bank while publicly still refusing U.S. demands for an official settlement freeze, government officials said Tuesday.

The decision to temporarily shelve new construction was made jointly by Prime Minister Benjamin Netanyahu, Defense Minister Ehud Barak and Housing Minister Ariel Atias, the officials said, speaking on condition of anonymity because no formal measure has been announced.

Netanyahu has refrained from initiating the new housing projects hoping to reach common ground with Washington, Atias told Israel Radio.

"Since the government was established five months ago, no tenders have been issued for Judea and Samaria," Atias said, referring to government invitations for bids for new construction in West Bank settlements.

"The fact is, we are in a holding pattern ... an attempt, I believe, to reach an understanding with the U.S. administration and a comprehensive peace agreement," Atias said.

Kobi Bleich, a spokesman for Atias - the official directly responsible for signing off on government construction - would not confirm or deny the report.

Mark Regev, a spokesman for Netanyahu, had no immediate comment.

The Israeli anti-settlement organization Peace Now confirmed no new tenders had been issued but said more than 1,000 housing units were currently under construction in the West Bank on land Palestinians want for a state.

U.S. President Barack Obama's administration has been prodding Israel to shelve all settlement construction on land Palestinians want for a future state, a demand Israel has said it cannot accept. The issue has grown into a rare public disagreement between the two close allies.

However, the government officials said Tuesday that Israel has decided to temporarily stop green-lighting new projects because of the international pressure.

The move falls short of the U.S. demand because it doesn't amount to a full freeze - projects approved in the past are still being built, and groups tracking settlements say the pace of construction in the settlements has not slowed.

Still, it could be an indication Israel is seeking a compromise with
Washington over the issue.

Netanyahu has resisted a total suspension of settlement expansion and is due to meet Obama's Middle East envoy, George Mitchell, in London next week in a bid to end the most serious rift in U.S.-Israeli relations in a decade.

Playing down the significance of the freeze in initiating fresh projects, Peace Now said Israeli government-sponsored building accounted for only about 40 percent of the Israeli constuction in the West Bank.

"Most of the building is through private initiatives from settler groups and non-governmental organisations," Peace Now said in a statement.

Palestinian President Mahmoud Abbas has made a resumption of peace talks with Israel, suspended since December, conditional on a complete settlement freeze.

But Israel hopes to persuade the United States to accept a continuation of existing building projects to meet the needs of the growing population in settlements the Israeli government hopes to keep in any future peace deal with the Palestinians.

Washington has been trying to persuade Arab states to take initial steps towards normalising relations with Israel as part of a settlement deal. On Tuesday in Washington, Obama was to meet Hosni Mubarak, president of the biggest Arab state, Egypt.

Diplomats said Arab countries were resisting U.S. pressure, demanding Isrel first completely freeze settlement activity.

Some 500,000 Israelis live in the West Bank and Arab East Jerusalem, territory Israel captured in the 1967 Six-Day War. The West Bank is home to 2.5 million Palestinians.