The Palestinians are ready to ease their demand for a freeze on Israeli settlement construction to get peace talks back on track, a top official told The Associated Press on Thursday.

The softened position reflects the Palestinians' growing realization that their alternative strategies to talks _ reconciling with the Hamas militant group and seeking unilateral recognition at the United Nations _ are both in trouble.

The official, who spoke on condition of anonymity because he was discussing a sensitive diplomatic proposal, said the Palestinians will ease the demand for a full construction freeze and resume peace talks if Israel accepts President Barack Obama's proposal to base negotiations on a broad Israeli withdrawal from lands captured in the 1967 Mideast war.

The issue is at the heart of the current impasse. The latest round of talks was launched last September at the White House after a two-year breakdown, only to collapse three weeks later with the expiration of an Israeli slowdown on settlement construction.

The Palestinians have been demanding a full freeze on all construction _ which would go further than that slowdown _ before resuming negotiations. Any move to drop or significantly ease that demand could put greater pressure on Israel to respond positively _ perhaps by accepting Obama's formula, which it has not done.

Officials in the office of Israeli Prime Minister Benjamin Netanyahu wouldn't comment on the Palestinians' latest offer.

A new complication emerged earlier this year when Palestinian President Mahmoud Abbas' Fatah party _ frustrated over the impasse with Israel _ began unity talks with its rival, Hamas. Israel has said it cannot negotiate with Abbas if he presides over a government that includes the Islamic militant group, which is sworn to Israel's destruction.

Difficulties that have emerged in implementing the unity pact _ especially over the choice of prime minister _ could render those objections moot.

With both the reconciliation effort and their U.N. strategy on the rocks, the Palestinians appear to be seeking a face-saving formula that would allow them to restart negotiations.

For months, the Palestinians have been saying there is no point in negotiating if Israel continues to build up Jewish enclaves in the West Bank and east Jerusalem, areas captured in the 1967 Mideast war and claimed by the Palestinians for their future state.

But on Thursday, a senior Palestinian official told the AP that the Palestinians could live with a construction slowdown, in which Israel continues building projects already under construction but agrees not to approve any new projects.

In return, he said the Palestinians want Israel to accept Obama's plan calling for an independent state based on Israel's pre-1967 lines, albeit with some modifications through mutually agreed "land swaps."

The Palestinians have presented their ideas to American mediators visiting the region in recent days in an effort to get long-stalled negotiations moving again, the official said.

An Israeli official, also speaking on condition of anonymity for the same reason, said Israel was sticking to its line on Hamas, and refused to comment on the settlement issue.

Netanyahu has ruled out a return to the 1967 lines and repeatedly said he believes Israel must keep east Jerusalem, home to sensitive religious sites, and broad swaths of the West Bank both for security reasons and to accommodate major settlements.

On Thursday, he repeated his demand that the Palestinians accept the existence of a Jewish state as the homeland of the Jewish people.

Last year's construction slowdown applied only to the West Bank and not to east Jerusalem, though in practice, building in east Jerusalem came to a halt.

Frustrated over the impasse with Israel, Abbas last month agreed to reconcile with Hamas and form a joint, caretaker government to prepare for new elections.

The Palestinians have been split between rival governments since Hamas defeated Abbas' forces and seized control of the Gaza Strip in 2007, leaving Abbas' Palestinian Authority in control only of the West Bank.

Initially welcomed by both sides, the reconciliation process has quickly run into trouble. Abbas wants to retain his current prime minister, Salam Fayyad, believing he is necessary to maintaining the flow of hundreds of millions of dollars in Western aid to the Palestinians. Hamas believes that Fayyad, a U.S.-educated economist, is too close to the West.

Other difficult issues loom in the future, most critically the reform of rival security forces. Hamas says it will never disband its militia in Gaza, a well-trained force of tens of thousands of men who possess rockets, anti-tank missiles and powerful explosives.

For now, both sides say they remain committed to forming the unity government. But the signs of trouble are clear. Early this week, Abbas called off a summit with Hamas' top leader, Khaled Mashaal, at short notice.

Adding to Abbas' troubles is the growing belief that the Palestinian plan to seek U.N. recognition of their independence will bring limited success at best.

The U.S. has already indicated it would veto any resolution that comes before the Security Council, the powerful body that must approve membership. That would force the Palestinians to turn to the General Assembly, where any vote would be nonbinding and amount to little more than a symbolic victory.

Chief Palestinian negotiator Saeb Erekat insisted the Palestinians have not changed their positions. He said they remained committed to reconciliation, the U.N. vote, and a full settlement freeze, though he said negotiations are still their preference.

"The Palestinian position is known and clear. We want the Israeli Prime Minister Netanyahu to accept the borders of 1967 as a basis for the two-state solution, and to stop all settlement activities in the Palestinian territories, especially in Jerusalem," he said.