Israel's lead peace negotiator Tzipi Livni Tuesday praised as "important" a concession by the Arab League that Israel and the Palestinians could trade land in a bid to move the peace process forward.

"This is very good news," she told army radio.

"It's definitely an important step -- I welcome it," said Livni a day after top Arab League officials said for the first time they would accept the concept of land swaps in the context of an Israeli withdrawal to the pre-1967 lines.

The development emerged out of talks in Washington between US Secretary of State John Kerry and an Arab League delegation to discuss the 2002 Arab Peace Initiative, a Saudi proposal which would see 22 Arab countries normalising ties with Israel in return for a withdrawal from lands it occupied during the 1967 Six Day War.

Under terms of the proposal, the Arab states would offer full diplomatic relations with Israel in exchange for "a total withdrawal by Israel to the June 4, 1967 lines" and the establishment of a Palestinian state.

However on Monday, Qatari Prime Minister Hamad bin Jassim said that although a final deal should mean a two-state solution based on the pre-1967 lines, it could involve a "comparable and mutual agreed minor swap of the land" to reflect the realities of the burgeoning communities on the ground.

Such a position marks a departure from the original text of the proposal, and comes closer to the US position as laid out by US President Barack Obama in May 2011 that any agreement must be "based on the 1967 lines with mutually-agreed land swaps."

Although Israeli Prime Minister Benjamin Netanyahu has rejected outright any return to the 1967 lines, Livni welcomed the softening of the Arab line.

"The things that were said last night were very positive," she said.

"It's a very important steps so I hail the Arab League and its representatives who were in Washington on this step."

In a separate interview with Israel's private Channel 2 television, she said Israel should be cautious over accepting the deal, but added: "What we can welcome is the direction and the step that the Arab world is taking today."

She said Israel was looking for anything which would break the current stalemate which has persisted since direct talks broke down in September 2010 over a thorny dispute about Israeli settlement building.

"Let's talk about it -- we are ready for changes, something which will allow the Palestinians, I hope, to enter the (negotiating) room and make the necessary compromises," she said.

"It also gives a message to Israeli citizens: it is no longer just us ... talking with the Palestinians, there is a group of Arab states who are saying: you reach an agreement with the Palestinians and we will make peace with you, we will have normalisation with you."

Since taking office on February 1, Kerry has plunged into the maelstrom of the Israeli-Palestinian conflict in the hope of breaking the impasse and seeing a resumption of some form of talks.

After his discussions on Monday, Kerry praised "the Arab League's very important role... in bringing about a peace in the Middle East, and specifically by reaffirming the Arab Peace Initiative here... with a view to ending the conflict."

Kerry has suggested the Arab Peace Initiative could provide a framework for a future deal.

He has already travelled three times to the region and met with top Israeli and Palestinian officials in pursuit of what he has called "a quiet strategy" for reviving the diplomatic process.

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