A senior Palestinian official said the Palestinians are ready to drop their demand for a complete settlement freeze to get peace talks with Israel back on track.
Talks have been stalled since September over Palestinian demands for a halt to all Israeli housing construction in the West Bank and east Jerusalem.
In the absence of negotiations, Palestinian President Mahmoud Abbas has agreed to reconcile with the rival Hamas militant group and pledged to ask the UN for recognition of their independence.
But with both of those efforts now in trouble, the official said the Palestinians are willing to tolerate limited settlement construction if Israel accepts a recent peace plan floated by President Barack Obama.
He spoke on condition of anonymity because no final decisions have been made.
Monday he would forgo a September declaration of state at the UN if the United States could provide a better suggestion.
"I don't know if the US has another option, but if it does, we will not go to the UN," Abbas told Lebanese television station LBC.
He added that the two "problematic" issues stalemating negotiations were "borders and security". The rest, he says, can be solved.