Israel is demanding that Ma'aleh Adumim, Efrat, Givat Zeev and Gush Etzion be included in Jerusalem's municipal borders as part of the discussion on the city's future at Camp David, Israel Radio reported, quoted by The Jerusalem Post.
AFP said the Palestinias showed leniency at the talks over the issue.
The four areas are outside the 1967 borders and Israel wants them to remain under Israeli sovereignty, said the paper Tuesday.
In return, Israel would hand over some Palestinian suburbs of Jerusalem to full Palestinian control and give the Palestinians a direct passage to the Temple Mount, the report says.
Israel would reportedly also agree to allow the Palestinian flag to fly over the al-Aksa mosque.
The trilateral talks at Camp David continued throughout the night in an effort to reach an agreement before US President Clinton's departure for Japan.
Meanwhile, AFP reported the same day that the Palestinians have shown leniency as to the final status of the holy city.
It quoted Palestinian and Israeli sources as saying the Palestinians have agreed that Israel has sovereignty over the settlements – (Several Sources)
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