Israeli Prime Minister Benjamin Netanyahu said on Monday he has discussed legislation with the United States that would annex settlements in the West Bank, but the White House denied it in a rare show of disunity.
Mr Netanyahu later issued a clarification somewhat backing away from the deeply controversial statement.
Annexing settlements would severely damage remaining prospects for a two-state solution to the Israeli-Palestinian conflict and draw international outrage, but Mr Netanyahu has been under heavy political pressure to support it.
"Regarding the issue of applying sovereignty, I can tell you that I have for some time been speaking with the Americans about it," Mr Netanyahu told politicians from his Likud party, according to comments relayed by a spokesman.
Mr Netanyahu said he wanted to coordinate any such "historic" move with the United States because of the country's strategic importance to Israel, his spokesman said.
Some Israeli media interpreted the comments as the first time Mr Netanyahu expressed support for annexing the settlements.
But when it became clear the White House was not confirming the remarks, Mr Netanyahu's office issued a clarification.
Mr Netanyahu "did not present the United States with specific annexation proposals, and in any case the United States did not give its consent to the proposals", an Israeli official said on condition of anonymity.
"Israel updated the United States on various proposals raised in the (parliament), and the United States expressed its clear position that it seeks to advance President Trump's peace plan," the official said.
The official added Mr Netanyahu's position "is that if the Palestinians persist in their refusal to negotiate peace, Israel will present its own alternatives".
White House spokesman Josh Raffel said "reports that the United States discussed with Israel an annexation plan for the West Bank are false".
"The United States and Israel have never discussed such a proposal, and the president's focus remains squarely on his Israeli-Palestinian peace initiative," he said.
Saeb Erekat, secretary general of the Palestine Liberation Organisation, had condemned Mr Netanyahu's earlier remarks as amounting to "land theft" with US complicity.
Limits to backing?
Mr Netanyahu faces pressure from right-wing politicians to move ahead with legislation that would apply Israeli sovereignty to settlements in the West Bank.
Two lawmakers, including one from Mr Netanyahu's party, have proposed such legislation.
Mr Netanyahu blocked it from being advanced on Sunday, with officials citing the need to focus on security issues following a confrontation that led to Israeli air strikes in Syria at the weekend.
Israel has sought to take advantage of Mr Trump's strong support, highlighted by his recognition of Jerusalem as Israel's capital in December, called "historic" by Mr Netanyahu but denounced by the Palestinians and most of the rest of the world.
Monday's episode showed there may be limits to Mr Trump's backing as he pledges to reach what he calls the "ultimate deal" - Israeli-Palestinian peace.
While Israel would expect to retain certain settlements in any two-state peace deal, long-standing international consensus has been that their status must be negotiated.
The same consensus has been in place for decades regarding the status of Jerusalem, with the Palestinians wanting the Israeli-annexed eastern sector of the city as the capital of their future state.
Israeli settlements are located in what is known as Area C of the West Bank, which accounts for more than 60 per cent of the Palestinian territory.
Annexing all settlements would leave little space for a Palestinian state.
Mr Netanyahu heads what is seen as the most right-wing government in Israeli history and prominent ministers openly oppose a Palestinian state.
Those who oppose a Palestinian state advocate for Israel to annex most of the West Bank, citing Jews' historical ties to the land from the biblical era.
Mr Netanyahu says he wants the Palestinians to govern themselves, but in recent months has declined to specify whether that would mean an independent Palestinian state or some lesser form of autonomy.
He has stressed recently that Israel must retain security control in the Palestinian territories under any peace arrangement.
While Mr Trump has offered strong support of Israel, he said in an interview published Sunday he was "not necessarily sure" the country was seeking to reach a peace agreement with the Palestinians.
"Right now, I would say the Palestinians are not looking to make peace," Mr Trump said in the interview with right-wing Israeli paper Israel Hayom.
"And I am not necessarily sure that Israel is looking to make peace."
In a rare rebuke, he also said Israeli settlement building "complicates" peace efforts.
Separately, Palestinian president Mahmud Abbas met Russian President Vladimir Putin in Moscow on Monday.
Mr Putin said at the start of the talks that he "just spoke" with Mr Trump on the Israeli-Palestinian conflict.
