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The plan, drafted in part by ex-military and intelligence officials, includes land swaps and no right of return.
The Labour party vote could determine the fate of Israel's governing coalition.
Barak and Ayalon to face each other in runoff elections for Labour leadership.
Television polls predict a second round runoff between Ehud Barak and Ami Ayalon.
The party leadership election could force the prime minister to resign.

Sexual humiliation of the kind practised by US military police at Abu Ghraib prison does little to help interrogators gain useful information, say Israeli counter-terrorism experts.

Middle East peace activists have warned that "time is running out" on an Israeli-Palestinian two-state solution.
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More than one-quarter of Gaza's population has been displaced, causing a humanitarian crisis.
Ministers and MPs caught on camera sleeping through important speeches have sparked criticism that they are not working.
Muslim charities claim discrimination after major UK banks began closing their accounts.
Italy struggles to deal with growing flood of migrants willing to risk their lives to reach the nearest European shores.
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