Saeb Erekat said on Friday the offer came last month through a foreign envoy who conveyed a message from Israeli Prime Minister Benjamin Netanyahu.

An Israeli spokesman denies the offer was made. The official spoke on condition of anonymity because of the sensitivity of the issue.

Erekat says the Palestinians dismissed it because it pertained only to government construction while most of the building is done by private contractors.

Palestinians refuse to negotiate with Israel while settlement building continues in the West Bank and east Jerusalem — territories they seek for their future state.