Israeli negotiators told their Palestinian counterparts that the separation wall that cuts through the occupied West Bank will serve as the border of a future Palestinian state, according to Israeli media reports.
Just hours before Secretary of State John Kerry's arrival for top-level talks on ongoing direct peace negotiations on Tuesday, two press reports said the Israeli team had made the proposal.
"Israel's opening position was that the border be the route of the separation barrier (wall), and not the 1967 lines as the Palestinians have demanded," public radio and Yediot Aharonot news agency reported.
Since peace talks resumed in late July, the Palestinians have repeatedly complained about Israel's lack of clarity on the issue of borders.
Israel began work on its wall in 2002 at the height of the second intifada, and has defended its construction as a protective measure, pointing to a drop in attacks inside Israel as proof of its success.
But Palestinians, who refer to it as the "apartheid wall," say it is a land grab. When complete, 85 percent of it will have been built inside the West Bank.
There was no confirmation of the report from Netanyahu's office, which has refused to comment on the content of the ongoing peace talks in line with a U.S.-requested media blackout.
Former Israeli Prime Minister Ariel Sharon, who oversaw the start of the barrier's construction, repeatedly insisted that the barrier was not a border for a future Palestinian state but only a measure to keep out attackers.
When construction began, Israel resisted calls to route it along the so-called Green Line, which acted as a de facto border between 1949, when fighting ended after Israel was established, and the 1967 war.
In 2004, the International Court of Justice issued a non-binding opinion declaring the barrier contrary to international law.