Israel wants to remain in control of 40 per cent of the West Bank and leave dozens of settlements intact as part of a peace deal that will create a Palestinian state with only temporary borders, according to Palestinian sources.
In the latest leak portraying Palestinian disenchantment with the revived peace process, an official familiar with the negotiations said Israel also wanted to leave military bases and installations in the West Bank, while retaining control of its border with Jordan.
"Israel is using the issue of security to take land," an official said. "From the general discussions we had in the last couple of weeks, the Israelis have shown no intention to dismantle any settlement."
Even evacuated settlements would stay intact, the official said.
The two sides remain deeply divided over future frontiers, which Palestinians insist should be based on borders that existed before the 1967 Six-Day War.
Prime Minister Benjamin Netanyahu argues that these are militarily indefensible.
Mahmoud Abbas, the Palestinian Authority President, has previously rejected the idea of an interim agreement that leaves intractable issues such as the status of Jerusalem - claimed by both sides as their capital - and the fate of refugees unresolved.
The latest disclosure comes after negotiators met on Tuesday for their sixth session since talks formally resumed at the end of July.