Israel will agree to temporarily freeze construction in settlements in the framework of new understandings that Jerusalem will reach with Washington, U.S. Secretary of State Hillary Clinton told European foreign ministers last week.

Commenting on Clinton's statements, Israeli and American sources confirmed that the parties were close to reaching an agreement. But they said the deal was not expected to be mentioned publicly in the visit by U.S. President Barack Obama's envoy to the Middle East, George Mitchell.

Mitchell is due to arrive in Israel on Sunday. Prime Minister Benjamin Netanyahu, who is scheduled to meet with Mitchell on Tuesday, reportedly said over the weekend that he thinks an agreement would require another round of talks with Mitchell.

"The magic formula has not yet been struck," a source in the Prime Minister's Bureau said. "The gaps are not big and there are creative proposals on both sides, but the gaps have not yet been bridged."

Commenting on Clinton's statement, a senior Israeli official said Clinton had told European foreign ministers that she is "optimistic" about the prospect of reaching an understanding on a construction moratorium in the West Bank.

Clinton reportedly told the Europeans that if the understanding is reached, it would be the first time an Israeli government agrees to halt construction in settlements. She also said, according to sources familiar with the situation, that she expected the European Union to show support and appreciation for the move by Israel.

Senior Israeli officials said Defense Minister Ehud Barak had supplied the Americans with a detailed list of all projects in the West Bank currently under construction and which Israel believes cannot be halted. The list contains 2,500 housing units, the number of units in each project, and the projects' location and construction stage.

The Americans are willing to allow most of the projects currently under construction to continue. A source close to Barak said that "if a moratorium is decided on, it will be in the framework of a more inclusive and wider deal."

But last Sunday, the cabinet decided that more than a third of the budget of the World Zionist Organization's Settlement Division for 2009 will go to assist agriculture in Jewish communities over the Green Line. NIS 20 million was included in the overall budget report presented to the cabinet.

Mitchell arrived in Damascus Saturday for talks with President Bashar Assad on prospects for reviving Syrian-Israeli peace talks. His visit is the latest U.S. diplomatic outreach to a country deemed a state sponsor of terrorism.

Last month, during his first trip to Syria since he took up his post, Mitchell acknowledged Syria's clout, declaring that Damascus has a key role to play in promoting peace in the region.

Mitchell did not speak to reporters after his arrival at Damascus airport Sunday. Mitchell is also set to discuss bilateral relations with Assad today. Mitchell will later travel to Israel as part of U.S. efforts to restart Israeli-Palestinian peace negotiations.

The Obama administration has held a series of meetings with Syria and hopes the diplomatic efforts will encourage Damascus to play a positive role in both the Middle East peace process and Iraq. Turkey has said it is prepared to resume mediating peace talks between Syria and Israel.

Mitchell's visit to Syria follows two separate trips in the past few months by Jeffrey Feltman, acting U.S. assistant secretary of state, and Daniel Shapiro, a Middle East expert at the White House. These visits are part of efforts to improve relations with a country shunned by former U.S. president George W. Bush.

Ahead of Mitchell's visit, Syrian Foreign Minister Walid Moallem said his country was working to rebuild its diplomatic relationship with the United States. On Friday, Moallem said Syria could play a role in finding a political solution to nuclear and other disputes between Iran and the West.

Akiva Eldar contributed to this article.