The Palestinians, backed by Arab powers, said on Saturday they would give the United States one month to persuade Israel to halt the building of settlements in the West Bank or risk the collapse of peace talks.

The message, issued at an Arab League meeting in Libya, represented a reprieve for Washington as it tries to salvage five-week-old talks stalled over Israel's refusal to extend a settlement freeze on occupied land where Palestinians seek statehood.

Diplomats said Abbas and Arab foreign ministers had in a closed session mooted "alternatives" to a future resumption of face-to-face negotiations with Israeli Prime Minister Benjamin Netanyahu.

Abbas's proposals included seeking US and UN pledges of recognition for a future Palestine taking in all of the West Bank, and a threat by the president to step down over the impasse, diplomats said.

Following those discussions on Friday, the Arab ministers said they would reconvene on the issue in a month. The Palestinians put the onus on the Obama administration.

"We are giving the United States an opportunity to convince Israel to stop settlements. We are giving them a month which will be a period of political interaction between the United States and Israel," Abbas spokesman Nabil Abu Rdainah said.

Netanyahu has resisted international calls to renew the settlement moratorium, which expired last month. Israel argues that the Palestinians should have entered negotiations earlier in the 10-month freeze and that the dispute would be irrelevant once peacemaking ripened to the point of demarcating borders.

Yet the moratorium wrangling masks far deeper divisions over what a final accord, should it ever be reached, would contain.

Palestinians want a state in the West Bank, including East Jerusalem, and in the Gaza Strip - lands Israel captured from Jordan and Egypt in a 1967 war.

Israel quit Gaza in 2005 but insists on keeping all of occupied Jerusalem - its declared capital - and swathes of West Bank settlements under any peace deal.

Netanyahu is beholden to pro-settler parties in his coalition government, while Abbas has no mandate in Gaza, now under Hamas Islamists who spurn peace with the Jewish state.

Friday's Arab League statement was welcomed in Washington, which, diplomats say, is asking for a 60-day extension to the settlement moratorium and offering Israel various incentives.

"We will continue to work with the parties, and all our international partners, to advance negotiations toward a two-state solution and encourage the parties to take constructive actions toward that end," said Philip J Crowley, assistant US secretary of state for public affairs.

Israeli officials declined to comment on the Arab League meeting. Israel Radio quoted an unnamed Netanyahu aide as crediting the Americans with keeping the peace talks in play.

Abbas has said he wants to go on negotiating but cannot unless the freeze remains for "three to four months more to give peace a chance".

The idea of Palestinians getting international recognition for a state in the 1967 lines, without Israeli consent, has been received coolly by the Americans and other powers in the past. They want a negotiated solution, though they do not consider Israel's settlements or its claim on East Jerusalem legitimate.

The Palestinians want their own capital there and say the settlements deny them sovereign contiguity in the West Bank.