Arafat and Barak hold talks

The main sticking point is the future of East Jerusalem

Israeli Prime Minister Ehud Barak and Palestinian leader Yasser Arafat have held their first peace talks since the collapse of the Camp David summit in July.

The two leaders met at Mr Barak's home in the central Israeli village of Kohav Yair.

A statement from Mr Barak's office said the meeting was aimed at "exchanging views, and not for conducting negotiations on specific issues".

Mr Barak faces strong opposition in the Israeli parliament

Correspondents say that a last-ditch effort is now under way to achieve a peace deal between the Israelis and Palestinians before the US presidential elections in November.

The BBC's Jerusalem correspondent Paul Adams says the late-night meeting may have been designed to clear the air.

Israeli officials have spoken of a need to improve the atmosphere of the talks.

Negotiators from both sides are preparing for further talks in the United States later this week.

'Crucial' stage

Earlier, the acting Israeli Foreign Minister, Shlomo Ben-Ami, said the talks were at a "crucial" stage.

"We feel this is the moment for decisions by leaders, tough decisions," he said after meeting Jordan's King Abdullah in Amman.

Mr Arafat has ruled out a partial deal

Camp David ended in failure after two weeks because the two sides could not agree on key issues such as the future of Jerusalem and the rights of Palestinian refugees.

But by common consent significant progress was made at the summit.

Jerusalem compromise plan

There are reports that Mr Ben-Ami is seeking support for a compromise solution on Jerusalem.

Under the compromise proposal, the five permanent members of the United Nations Security Council would have sovereignty over the area the Jews call the Temple Mount and Muslims know as the Haram al-Sharif.

A BBC analyst, Roger Hardy, says this is a controversial idea in Israel, but for Mr Barak it is preferable to either Palestinian or Muslim sovereignty over this part of the city - proposals put forward by the Palestinians.

Mr Ben-Ami also said Israel would consider a partial agreement with the Palestinians if a comprehensive one seemed out of reach.

But Palestinian officials have ruled out any deal that does not include an agreement making all of Arab East Jerusalem the capital of a future Palestinian state.

At the Camp David summit, Mr Barak accepted the principle of shared sovereignty over East Jerusalem, which Israel captured in 1967, for the first time.