A senior official in the government of Israeli Prime Minister Ariel Sharon denies he tried to reach a secret deal with Jewish settler leaders to evacuate some of their communities.
Jewish settler leaders say they have rejected an Israeli government proposal to sacrifice seven established communities to save all others.
Yesha, the council representing Jewish settlements in the West Bank and Gaza Strip, says that the proposal was put forward by the director-general of Mr. Sharon's office, Avigdor Yitzakhi.
The leaders say he proposed that, if the seven settlements were dismantled with consent, then the government would pass a new law forbidding the evacuation of any more such communities until a final peace agreement is signed with the Palestinians.
Four of the settlements are in the West Bank and the remainder in the Gaza Strip, including Netzarim, a frequent flashpoint of violence between soldiers and Palestinian militants.
The settlers' representatives say they turned down the offer, describing it as a disgrace.
A spokesman for Mr. Sharon's office says that Mr. Yitzhaki "flatly denies" that he made any such offer in the manner and content that has been attributed to him by the settler leaders.
Mr. Yitzhaki's talks with settler leaders came as Mr. Sharon is preparing to visit Washington to present an outline of his plan to unilaterally separate Israel from the Palestinians if peace talks end in failure.
Mr. Sharon has said that his plan would include the dismantling of some Jewish settlements and the completion of a controversial security barrier in and around the West Bank.
He has been under pressure from the U.S. administration to halt settlement activity as part of efforts to revive the international road map to peace plan.
The plan, which is backed by the United States, Russia, the European Union and the United Nations, calls for the establishment of an independent Palestinian state by 2005.
Senior State Department officials John Wolf and David Satterfield arrived in the region Tuesday to discuss the plan with Israeli and Palestinian leaders.
Their arrival coincided with that of Egyptian Foreign Minister, Ahmed Maher, and Egypt's Intelligence chief, Omar Suleiman, who held talks Tuesday with Palestinian President Yasser Arafat in the West Bank city of Ramallah.