Israeli Prime Minister Benjamin Netanyahu (R) meets with Jason Greenblatt, Donald Trump's special representative for worldwide negotiations at the Prime Minister's Office in Jerusalem, March 13, 2017.
According to the report, Greenblatt said that the us would accept Israeli construction in Jewish neighborhoods in eastern Jerusalem and construction in agreed-upon settlement blocs, but with an annual quota.
Palestinians argue that the presence of six Israeli football clubs playing on land containing settlements seen as illegal under global law is in breach of FIFA statutes.
She said no reasonable alternative to the issue is possible than the goal of a two state-solution. "The two delegations also discussed Israeli settlement construction".
Israel claims to have annexed the territory in 1980, but that move is not recognised by the global community.
Israeli police have launched an investigation after an officer was filmed assaulting a Palestinian truck driver in East Jerusalem.
Around three million Palestinians live in the West Bank and east Jerusalem.
"The reports concerning...any purported USA demands of Israel in talks regarding the settlements are false", the official said.
Before meeting Abbas on Friday, Merkel warned Palestinians that if they wanted peace it was wrong to condemn Israel within global bodies.
At that meeting, Trump also broke with decades of U.S. policy by saying he was not bound to a two-state solution to the conflict and would be open to one state if it meant peace.
Netanyahu has been in discussions with US President Donald Trump's administration on how to move forward with settlement building.
After Netanyahu and Greenblatt failed to resolve the issue during the latter's Israel visit, which also included meetings with Palestinian Authority president Mahmoud Abbas, Netanyahu sent officials to Washington in order to continue negotiations.