Israel laid out a vision for an "impossible" border during exploratory talks with the Palestinians in Amman this month, a Palestinian official told AFP on Sunday.
The official, who spoke on condition of anonymity, said Israeli officials presented principles for their policy on future borders during the final round of the discussions organised by Jordan and the peacemaking Quartet.
They presented a vision that would closely follow the line of Israel's controversial security barrier and leave all of Jerusalem inside Israel, he said.
"They said to us, Jerusalem is out of the question. Large numbers of settlers will stay in the West Bank. They were talking about impossible borders," the official said.
"They didn't specifically mention the wall, but the details can be interpreted as them using the wall for the border," he added.
The Palestinians have long complained that Israel built the barrier with the intention of eventually turning it into an international border.
Israel says the barrier is designed to prevent attacks and cites a decrease in the number of deadly bombings since construction began in 2002.
When the 709-kilometre (435-mile) barrier is complete, 85 percent of it will have been built inside the occupied West Bank.
The official said that the Israeli presentations, made during a final round of talks on January 24 and 25, revealed wide gaps between the two sides.
"All their positions are based on the premise that the settlers and the Palestinians have equal rights to the West Bank," he said.
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"The whole Israeli vision is based on this. The territory is not occupied, it's disputed, and both communities have equal claims to it. Of course, this only applies to the West Bank, they don't think we have any claim to Haifa," he added, referring to a town in northern Israel.
Israeli and Palestinian negotiators held five rounds of so-called exploratory talks this month, intended to help chart a path back to direct negotiations.
The discussions were supervised by Jordan and the peacemaking Quartet, comprising the United States, United Nations, European Union and Russia.
The Quartet called on October 26 for both sides to present comprehensive proposals on territory and security within three months, which the Palestinians say they have done, accusing Israel of failing to do the same.
Israel says it has laid out some of the principles on which its policy on territory and security is based, but that it considers the three-month period to have started with the first round of talks on January 3.
On Sunday, Israeli Prime Minister Benjamin Netanyahu accused the Palestinians of stalling the talks.
"The Palestinians refuse to even discuss with us Israel's security needs," he said at the beginning of his weekly cabinet meeting.
"The signs are not particularly good, but I hope they will come around and that they will continue talks in order to make progress towards negotiations."
The talks were the latest bid to kick-start direct negotiations on hold since late September 2010, when an Israeli partial settlement freeze ended.
The Palestinians say they will not hold talks while Israel builds on land they want for a future state, and they want negotiations on borders to be based on the lines that existed before the 1967 Six-Day War.
The Palestinians are set to hold a series of internal consultations in coming days, and will also seek guidance from the Arab League about whether to continue talks.