Despite intense American negotiations going on into the night, a partial Israeli West Bank settlement freeze expired Sunday with no apparent deal reached. Yet there were signs Monday that the U.S.-sponsored Israeli-Palestinian peace talks might continue in spite of the current settlements impasse.

U.S. officials were tight-lipped as intense negotiations continued Sunday, saying only that Secretary of State Hillary Clinton had spoken with Israeli Prime Minister Benjamin Netanyahu and Quartet Envoy Tony Blair Sunday. Meantime, Palestinian negotiators led by Saab Erekat met with Middle East peace envoy George Mitchell and Assistant Secretary of State Jeff Feltman in New York Sunday.

Amid the current impasse, American officials were urging that talks should continue.

“Our policy on settlement construction has not changed,” State Department spokesman P.J. Crowley said in a statement Sunday. “We remain in close touch with both parties and will be meeting with them again in the coming days. We remain focused on the goal of advancing negotiations toward a two-state solution and encourage the parties to take constructive actions toward that goal.”

"Israel is ready to pursue continuous contacts in the coming days to find a way to continue peace talks between Israel and the Palestinian Authority," Netanyahu said in a statement Sunday.

Netanyahu’s call for restraint as the freeze expired was met with settler celebrations and the rumbling of tractors and bull-dozers, pictures beamed round the world.

Meantime, Palestinian President Mahmoud Abbas appeared to offer a possible formula under which he could stay in the talks. Abbas, speaking in Paris Sunday, said he would go to the Palestinian Liberation Organization and to the Arab League next week to get their take on whether he should continue direct talks.

Negotiations towards a compromise appear to be continuing in the days leading up to the Arab League meeting scheduled for October 4th.

A senior Palestinian official said Monday that under a possible compromise deal still being discussed, resumed West Bank settlement construction would be limited to large settlement blocs that Israel expects would be absorbed after the creation of a Palestinian state, in exchange for other land going to the Palestinians.

"The point of departure is that only the large blocs will remain under Israeli sovereignty, with negotiations conducted on the scope of alternate areas to be given to us in exchange for handing over the blocs to Israel," a senior Palestinian official told Israeli newspaper Ynet.com.

One former U.S. Middle East official said that Netanyahu decided last week that he had to let the freeze expire the 26th for his own domestic political reasons, but would be open to a compromise after that. The fact that Abbas has indicated he is giving until the Arab League meeting on Oct. 4th before he announces whether he'll stay or leave the talks suggests he expects a deal might come after the freeze expiration this weekend, the former official suggested.

"Obama has told Abbas, 'If you walk away, I can't help you,'" a Washington Jewish community representative said Monday.

Now begins "the game of brinksmanship between Netanyahu and the Palestinians over who can assert their will without breaking talks," the American Task Force for Palestine's Hussein Ibish told POLITICO Sunday. "Neither wants to be blamed" for the talks collapsing, he added, suggesting this would make Abbas inclined to stick with the talks for now -- "unless the Israelis do something outrageous."

Former U.S. peace negotiator Aaron Miller agreed that negotiators may be able to find a "soft landing."

There appears to be no freeze "extension, but what I call a soft landing which over the next several weeks will allow the talks to continue," Miller said.