A senior government official says Israel is prepared to relinquish parts of Jerusalem as part of a peace agreement. But as Robert Berger reports from the VOA's Jerusalem bureau, there is opposition to the plan in the Cabinet and Palestinians say it is not enough.

Israel's Deputy Prime Minister Haim Ramon says the Israeli government would support a division of Jerusalem as part of a peace deal with the Palestinians.

Ramon told Israel Radio that under the plan, Israel would transfer many of the Arab neighborhoods in East Jerusalem to the Palestinians.

This would be a key component of an Israeli-Palestinian declaration to be made at an international peace conference in the United States this year.

The plan marks a sea change in Israel's position, after it captured East Jerusalem from Jordan during the Six Day War in 1967. Since then it has been an Israeli slogan that Jerusalem would remain the united capital of the State of Israel forever.

Ramon said Israel does not need 170,000 Arabs in Jerusalem, about a third of the city's population, to be citizens of the Jewish state.

But the plan is facing opposition from hawks in the Cabinet, like Minister Shaul Mofaz.

"We need to strengthen Jerusalem, not weaken it," Mofaz said.

A former general, Mofaz warned that handing areas of Jerusalem to Palestinian control would pose a major security threat to Jewish neighborhoods in the city.

Palestinian officials say Israel's position is a step in the right direction, but that it still does not resolve the key issue: sovereignty in Jerusalem's Old City. The Palestinians say any peace deal must be based on an Israeli withdrawal to the 1967 borders, which would include a pullout from the Old City.

But Israel says it will never give up Jewish holy places such as the Temple Mount, which is also home to the Mosque of Al Aksa, the third holiest place in Islam.

Old Jerusalem is a focal point of religious aspirations and tensions, and it remains a stumbling block to a peace deal.