Israeli prime minister Benjamin Netanyahu has proposed a 10-month restriction on new building in Jewish settlements in the West Bank - but not in East Jerusalem.
Mr Netanyahu says the move is aimed at encouraging the resumption of peace talks with the Palestinians.
The Palestinian Authority has reacted negatively, however, with chief negotiator Sayeb Erekat saying that any settlement freeze that does not include East Jerusalem is unacceptable.
The BBC's correspondent in Jerusalem says many will see the announcement as a cynical move to appease the United States, which says Mr Netanyahu's announcement will help "move forward" peace efforts.
US Middle East envoy George Mitchell says the move does not represent a settlement construction freeze, but is nevertheless "significant" and might have "a substantial impact on the ground".
Work just started won't be stopped
Mr Erekat says there's nothing new in the offer. He observes that, as Mr Netanyahu confirmed, Israel is still going ahead with building 3,000 housing units in the West Bank that have just been started.
In a televised statement, Mr Netanyahu said his security cabinet had earlier authorised the "policy of restraint regarding settlements which will include the suspension of new permits and new construction in [the West Bank] for a period of 10 months".
"This is a far-reaching and painful step," he said.