WASHINGTON — The United States and Israel are working on a deal that would end most expansion of settlements, according to an Israeli official in Washington.

The deal calls for no building of new settlements, no expropriation of land for building and no external expansion of existing settlements, said the official, speaking on the condition of anonymity.

However, it is believed that Israel would be allowed to continue construction projects inside settlements where homes have already been built.

"We are going to use creativity to get to a win-win situation," the Israeli official said.

But the official noted that any settlement agreement with the Palestinians would only come after a complete cease-fire, a cooling-off period and the implementation of confidence-building measures.

These steps were contained in the guidelines of an international fact-finding commission led by former Sen. George Mitchell released last month.

Discussions about the settlement issue have been taking place between Israeli officials and William Burns, assistant secretary of state for Near Eastern affairs, who is in the Middle East.

"Israel is willing to find a formula that all sides can live with," the Israeli official told JTA.

While welcoming the U.S.-Israel talks, Lewis Roth, assistant executive director of Americans for Peace Now, said there are still several open questions remaining about settlements.

Among the issues yet to be broached are whether additional land will be expropriated for access roads between settlements and Israel, and whether settlements believed to have been built after the election earlier this year of Israeli Prime Minister Ariel Sharon will remain intact, Roth said.

The definition of the settlement boundaries will also be key, he said.

"For this proposal to have any meaning, it is going to have to have a very narrow definition of what the boundaries are," said Roth, whose organization is opposed to settlement expansion.

State Department spokesman Richard Boucher denied Wednesday that an agreement had yet been achieved.

"We have not reached any agreement with the Israelis on settlement activities," he said. "We continue to see settlement activity as provocative as it risks inflaming already volatile situations in the region, and therefore we continue to see it as one of the issues — an issue that definitely needs to be addressed as part of the efforts to build confidence between the parties."

Boucher acknowledged that the topic is being dealt with in discussions involving Burns, the Israelis and ambassadors in the region.

The discussions come as Israeli-Palestinian violence diminished this week, following separate calls for a cease-fire from each side.

CIA Director George Tenet arrived in the region Wednesday to hold separate discussions with Israeli and Palestinian officials on security issues.

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