Jerusalem ? In the clearest sign that a deal may be emerging to keep the troubled U.S. Mideast peace push alive, a top Palestinian official said Thursday that his side would accept an American proposal for Israel to curtail settlement construction for two months.

Israel indicated it, too, was edging toward a compromise. The country’s ambassador to Washington confirmed for the first time that the U.S. is offering “incentives” for Israel to extend a just-expired settlement slowdown. Prime Minister Benjamin Netanyahu also came out in favor of a contentious new loyalty oath in what appeared to be an attempt to placate hard-liners opposed to further concessions on the settlements.

The settlement issue has threatened to derail peace talks just a month after they were launched at the White House.

The Palestinians have threatened to walk away from the talks if Israel resumes settlement construction on lands claimed by the Palestinians for a future state.

An Arab League gathering this weekend is expected to recommend support today for whatever the Palestinians decide. A resolution to call off the talks would be a critical setback, but diplomats are hoping for a more ambiguous statement that would leave room for compromise.

With the clock ticking, U.S. mediators have been trying to broker a compromise that would salvage the negotiations.

Palestinian negotiator Nabil Shaath told The Associated Press Thursday that the Palestinians accepted a U.S. proposal for a 60-day extension to the Israel settlement slowdown, with the idea that final borders between Israel and a Palestinian state be negotiated during that time.