The Palestinians said Thursday they have accepted a U.S. proposal calling on Israel to extend a West Bank settlement slowdown for two months, the latest indication that a deal is emerging to keep peace talks from collapsing.

Israel has so far declined to extend the slowdown, despite American pressure and pledges.

Negotiator Nabil Shaath said the period would be used to try to hammer out an agreement on a border between Israel and a future Palestinian state and another extension would be required if the sides failed to reach agreement.

The Israeli settlement limits, which expired on Sept. 26, banned most new housing starts while allowing completion of apartments already under construction and the building of public structures.

Under U.S. pressure, Israeli Prime Minister Benjamin Netanyahu has been sounding out key Cabinet members on extending the freeze in exchange for American political assurances, but he has run into stiff opposition from pro-settlement ministers.

The Palestinians have threatened to walk out of the talks if Israel refuses to reinstate the moratorium, which was in force for 10 months to promote resumption of peace talks. Another deadline of sorts has emerged with Friday's planned summit of the 22-nation Arab League, where the Palestinians expect support for whatever they decide.

Shaath said that in principle, "We will not accept anything less than stopping settlement activity in total, period."

The Israelis and the Palestinians resumed talks last month in Washington despite concerns they might be derailed by the settlement issue.

Various incentives have been floated, including American military aid to Israel, diplomatic support at the United Nations and backing for key Israeli positions in the peace talks. It remains unclear what, if any, formula will break the impasse. Israeli officials said Netanyahu has sent out diplomatic feelers asking the Arab League to postpone its vote this weekend to give him more time to work out a deal.

Indirectly addressing the peace negotiations, Netanyahu scheduled a Cabinet vote on a contentious citizenship bill in what appears to be a move aimed at garnering support for an extension of a West Bank settlement slowdown.

The bill would amend a loyalty oath for non-Jewish immigrants applying for citizenship to describe Israel as "Jewish and democratic." While largely symbolic, it has angered the Palestinians and Israel's own Arab minority.

Among the main backers of the measure is Foreign Minister Avigdor Lieberman, who opposes extending the settlement slowdown. Cabinet approval of the declaration might win a softening in his position on settlements. Lieberman's allies denied there was a deal.

Also, Netanyahu said the measure is meant to underline Israel's insistence that in the negotiations, the Palestinians must recognize Israel as a Jewish state. "There is a very big struggle today to abolish, to blur, the state of Israel as the national homeland of the Jewish people," Netanyahu said Thursday during a visit to the central Israeli city of Lod.

The Palestinians are refusing to declare Israel a Jewish state for two reasons: they feel it would undermine the status of Israel's minority Arab community and would undercut their claim of the right of millions of Palestinians — refugees and their descendants — to return to their original homes in Israel.