"This is a new manoeuvre to extract more concessions from the Americans and taking this course will mean expanding settlements in Gaza Strip," said Yasir Abid Rabbo, a senior Palestinian official.
Rabbo called for the implementation of the peace "road map" that outlines reciprocal steps leading to the establishment of a Palestinian state in 2005.
The Palestinian reaction comes amid moves by Israeli Prime Minister Ariel Sharon on Tuesday to amend his US-backed Gaza pullout plan that his Likud party rejected, holding consultations with cabinet ministers on a new blueprint.
Sharon met Justice Minister Yosef Lapid, a senior coalition partner with 15 seats in the 120-member parliament. Lapid kept pressure on Sharon by threatening to take his Shinui party out of the government if the plan was scratched from the agenda.
The prime minister said on Monday he would amend the proposal, which Likud rank-and-file voted down by a 60-40% margin in a referendum on Sunday.
"This is a new manoeuvre to extract more concessions from the Americans"
Yasir Abid Rabbo
senior Palestinian official
Newspapers reported that would mean scaling back the original plan to evacuate all 21 Gaza settlements and four in the West Bank. Instead, the reports said, three Gaza settlements and two in the West Bank would go. There was no immediate official comment on the reports.
Shimon Peres, head of the main opposition Labour Party, urged Sharon not to water down the plan, predicting the Likud would oppose any ceding of land to the Palestinians.
"They won't let Sharon push through anything serious, even a more limited plan," said Peres, calling for a general election.
US President George Bush drew Arab rage when, in backing the plan, he said Israel could not be expected to give up all the land it captured in the 1967 Middle East war.
Meanwhile, senior officials of the Middle East peacemaking "Quartet" - the United States, the European Union, Russia and the United Nations - planned to meet in New York later on Tuesday to discuss its violence-stalled "road map".