The Israeli government is negotiating a deal with West Bank settlers that would see a large number of unauthorized settlement outposts made permanent, settlers and security officials said Thursday.

The deal, which would decide the fate of more than 100 outposts in the West Bank, is being worked out by settler leaders and Defense Minister Amir Peretz , according to Emily Amrussi, a spokeswoman for the settlers.

Though Peretz is a moderate who has called in the past for the removal of all unauthorized outposts in the West Bank, the new deal would see most of them legalized, Amrussi said. A smaller number would be moved and only a handful would be evacuated entirely, she said.

Israel said it would evacuate all outposts built after 2001 as part of President George W. Bush's "road map" peace plan, but so far has made no real attempt to do so. A compromise that left significant numbers of outposts in place could constitute a violation of Israel's commitments under that plan.

Click here to go to FOXNews.com's Mideast Center.

The sides are close to an agreement in principle, Amrussi said. She estimated that it would take another three months to hammer out the details and reach agreements with settlers in the outposts slated for evacuation.

Army officers, speaking on condition of anonymity because they are not authorized to speak to the press, confirmed that negotiations with the settlers are taking place. Maj. Gen. Yair Naveh, who heads the Israeli army's Central Command and is the officer in charge of the West Bank, supports the attempt to reach an agreement that would see some outposts legalized and others evacuated, the officers said.

Otniel Schneller, a legislator from Prime Minister Ehud Olmert's Kadima party, is involved in the negoatiations, a Schneller aide said. Schneller, himself a settler, is close to Olmert.

"The talks are very real, and if there hadn't been a war this summer they would probably have an agreement already," said the aide, Shmulik Villian. Schneller was unavailable for comment.

The Defense Ministry confirmed that talks with settler leaders are taking place and would continue, saying Peretz initiated them to defuse tension and allow the evacuation of illegal outposts to proceed. The talks were "not negotiations, but dialogue," the ministry said in a statement, and no agreements had been reached. "We are not negotiating over the enforcement of the law," the ministry said.

Peace Now, an Israeli group that favors a withdrawal from the West Bank and tracks the construction of settlements, criticized the reported negotiations.

"We don't think lawbreakers need to get a prize, and we're afraid that this deal will be cosmetic — that one or two outposts will be evacuated and the rest declared legal," said Yariv Oppenheimer, the group's director. But if the agreement leads to the removal of most outposts, Oppenheimer said, he would see it as progress.

Settlers began building outposts in the early 1990s, when Israel declared an official settlement freeze as part of the Oslo peace process. Today there are more than 100 such outposts, typically consisting of trailers inhabited by young Orthodox settlers. The outposts were built against the law, though often with the tacit or active participation of government offices and with government funds.

Last year, police clashed violently with settlers at one outpost, Amona, when the government ordered the demolition of nine permanent houses built there. The buildings were bulldozed, but the large trailer encampment — which an Israeli government report has said sits on privately owned Palestinian land — was not touched.

Israel's military operation along the Gaza Strip's border with Egypt continued Thursday, with no serious clashes reported since soldiers shot and killed two Palestinian militants Wednesday morning. The army said the operation was aimed at uncovering tunnels used by Palestinian militants to smuggle weapons into Gaza, and that troops had found seven such tunnels since Tuesday.