There is one obvious solution for Israel's West Bank settlements that has been all but completely overlooked: Let the settlers continue living where they are, but in the state of Palestine.

As a conception, it's stunningly simple. Its very obviousness has rendered it invisible, like something in one's field of vision that goes unnoticed because it has been there all the time. If over one million Palestinian Arabs can live as they do in towns and villages all over Israel, why cannot a few hundred thousand Israeli Jews live, symmetrically, in a West Bank Palestinian state?

The West Bank settlers have not only been a major obstacle to the success of peace negotiations in the past, they have now turned into an obstacle to negotiations taking place at all. Although Israel, under heavy American pressure, has agreed to a 10-month freeze on new settlement construction, it has refused to suspend construction already under way or in Jerusalem. The Palestinian Authority, initially encouraged by American intimations of a more comprehensive Israeli gesture, has declared that it will not return to the negotiating table in its absence. Yet if the settlers could live under Palestinian sovereignty, what need would there be for a freeze at all? And why wrangle endlessly over where a tortuous border between Israel and Palestine should run so that a maximum of settlers ends up on the Israeli side and a minimum gets evicted from the Palestinian side if there is no inherent necessity for any to be on the Israeli side or for any to be evicted?

Because, you may say, the settlers have no right to be on Palestinian land to begin with. Or because they would not tolerate living under Palestinian rule. Or because the Palestinians would not tolerate them. Or because they and the Palestinians could never get along even with the best of intentions.

"They," though, are hardly a monolithic group. They are a highly heterogeneous population, having in common only one thing: the fact that all live across the Israeli-Jordanian cease-fire line with which Israel's 1948-49 war of independence ended, on land wrested by Israel when it conquered Jordan's holdings west of the Jordan River in 1967. All are in "Area C," the part of the West Bank that has remained, according to the terms of the 1993 Oslo agreement, under temporary Israeli jurisdiction.

Beyond that, however, the differences are great. Some settlements were built on former Jordanian government-owned land that passed to Israeli jurisdiction, some on land purchased from Palestinians, some on land that was expropriated. Some are 40 years old and some were established recently. Some are isolated outposts, some small villages, some medium-sized towns with six- and eight-story apartment buildings. Some settlers are living where they are, often in the more isolated areas of the West Bank, for religious or ideological reasons; others, generally closer to the old 1967 border, because they have found well-located and pleasant surroundings at affordable prices. There are those who would willingly accept compensation in return for being evacuated as part of a peace agreement and those who would resist evacuation with all their might.

And there are settlers, roughly 225,000, who live on the "Israeli" side of the anti-terror West Bank security fence and settlers, about 75,000, who live on its "Palestinian" side. (Another 200,000 Israelis living in parts of former Jordanian Jerusalem that were annexed by Israel in 1967 are not listed by Israeli statistics as settlers at all.) Approximately 1/20th of Israel's Jewish population, the settlers' numbers have grown by over 5% a year, some three times the national average—a figure due to in-migration, mostly of young couples, and a high birth rate.

Indeed, given the political uncertainty and physical risk of living in the West Bank, where Palestinian terror has stalked the settlers repeatedly, their increase has been phenomenal. In 1977, the year in which the Labor government of Yitzhak Rabin, which had reined in settlement activity, was replaced by the pro-settlement Likud government of Menachem Begin, the West Bank's Jewish population was barely 7,000. By 1988, it had grown to 63,000; by 1993, to 100,000; by 2006, to 230,000. And even with Prime Minister Benjamin Netanyahu's current freeze on new West Bank building starts, enough pre-freeze units are under construction to ensure that this rate of growth continues through 2010.

By contrast, the Palestinian population of the West Bank, though also increasingly rapidly, has done so less spectacularly: it is currently guesstimated (agreed-on figures are impossible to come by) at about two million. Aren't the Palestinians, then, justified in their alarm over settlement growth and their insistence that it be stopped? How can they establish a state of their own with a swelling Jewish minority with whom they live in relations of hostility?

This is a fair question that deserves an honest answer—the first part of which is that, even if the settlements were indeed an insurmountable obstacle to peace, Jews would still have a right to live in the West Bank, the hill country south and north of Jerusalem that has always been called by them Judea and Samaria. It was there that the Jewish people was born; that the Hebrew language originated; that the Bible was written and most of the events described in it took place; that the kings of Israel reigned and the Prophets of Israel spoke out. By what principle should Jews be able to live anywhere in the world except for the most traditionally cherished part of their ancestral homeland?

Nor is it true, conventional wisdom notwithstanding, that the settlements are "illegal." The case for this belief rests almost entirely on the fourth Geneva Convention of 1949, article 49(6) of which states that an occupying military power "shall not deport or transfer part of its own civilian population into the territory it occupies." Yet not only has Israel "deported" or "transferred" no one to the settlements, whose inhabitants are there of their own free will, it did not come into possession of the West Bank as an occupying power.

This is because, after its 1967 victory, Israel had as good a legal claim on the West Bank as anyone. The Jordanian annexation of the area, while consented to by the same Palestinian leadership that rejected the 1947 United Nations partition resolution which would have created a Palestinian state then, was unrecognized by the rest of the world, and Jordan itself refused to make peace with Israel or accept the 1949 border as permanent. As the sole sovereign state to have emerged from British-Mandate Palestine, Israel, it can be maintained, was the West Bank's legitimate ruler pending final determination of the area's status.

Of course, it can be retorted that, however true, all this is irrelevant. In practice, Israel has behaved in the West Bank like an occupying power by systematically favoring the settlers over the Palestinian population, with whose interests and welfare it has rarely been concerned. This is a major reason why the Palestinians need a state of their own. And if they do, and if the settlers are in the way of it, must not the settlers go, no matter how great their theoretical right to live in the West Bank may be? When theory clashes with reality, must not reality come first?

It certainly must. But there is another reality as well. Even if all the settlers living on the "Israeli" side of the security fence end up in Israel in the land swap that has come to be an assumed part of any peace deal, the 75,000 who would find themselves in a Palestinian state happen to be the very element of the settler population—the ideological and religious militants living deep in Palestinian territory—who are most committed to being where they are. What does one do with them?

The standard answer is: one evacuates them by force, just as was done with the 8,000 settlers forcibly evicted in the summer of 2005 when Israel left the Gaza Strip. Whoever doesn't want to leave the Palestinian state on his own two feet can be carried by his arms and legs.

But this cannot be done—and it cannot be done because of what happened in Gaza. To carry out the Gaza operation, Israel had to undergo months of agonizing debate that fractured its political party system; to divert a large part of its army and police force to the task in expectation of settler violence; to experience the national trauma of witnessing men, women and children literally dragged from their homes as Jews were in the past only by their persecutors in their countries of exile; to find itself saddled with a bill of billions of dollars for the evictees' relocation and rehabilitation; and today, nearly five years later, to face the reality that many of them have had their lives severely disrupted and still lack permanent homes. If this is what happened with 8,000 settlers who did not resort to violence in the end, what will happen with 10 times that many who almost certainly will?

This is something the Israeli public is not prepared to find out. It is not going to let itself undergo a trauma 10 times greater than that of 2005 and it will not be pushed to, or over, the brink of civil war. It lacks the political will to oust the more militant settlers from their homes and it will not do so, no matter what the world expects of it or some of its own politicians say.

Clearly, these settlers do not want to be under Palestinian rule and would threaten violent resistance to it, too. But they would quickly find out that a Palestinian police force would not coddle them as Israeli governments have done, and paradoxically, because they attach a greater value to the Land of Israel than to the State of Israel, many of them might ultimately be willing, if they could have their civil and property rights safeguarded and continue to be Israeli citizens, to live in the land but outside the state. So might many of the more politically moderate ultra-Orthodox and secular Jews in the settlements, whose approach would be more pragmatic. Were they offered a status analogous, say, to that of French Canadians living in Vermont a short drive from the Quebec border, they might well prefer it to giving up their homes.

Needless to say, the Palestinians are not Vermonters and have no love for the settlers. Yet they, too, might agree to such an arrangement if there were substantial benefits in it for them. And there could be: a return to the 1967 frontier, the dismantling of the security fence, open borders with Israel, and the reciprocal right of Palestinians to live and work there as Palestinian citizens. Nor would the continued presence of the settlements on Palestinian territory choke Palestinian development as it does now, for while Area C occupies close to three-fifths of the West Bank, once it were under Palestinian jurisdiction, the settlements themselves would remain with only a tiny fraction of the West Bank's land.

Granted, the settlers living in a Palestinian state would constitute a potential tinderbox that, given the built-in tensions between them and the Palestinian population, could flare up at any time. Preventing this from happening would depend on both them and on the Palestinian government, both of which would have to curb extremist elements. Yet the fact that the settlers would not have Palestinian citizenship would isolate them from the Palestinian political process and remove some points of friction, and if their Palestinian neighbors felt that they, too, were the recipients of a fair deal, the moderates among them might well prevail. And there would be an advantage in each country playing host to a large number of the other's citizens, for each would in effect be holding a body of hostages that it would have to treat well.

It would be difficult. It would be complicated. It would be risky for both sides. But isn't it at least worth thinking about? Not a conventional two-state solution, and not a disastrous one-state solution, but a Palestinian-Israeli federation with Palestinians in Israel and Israelis in Palestine. It may be the only real solution now left.

Hillel Halkin is an American-born author and translator who has lived in Israel for the past 40 years.