JERUSALEM – Hopes of averting a breakdown in Middle East peace talks grew Thursday as senior Palestinian officials said their side would consider an expected U.S.-brokered compromise on Israeli settlement-building in the West Bank.

Two senior Palestinian officials said that President Obama’s special Middle East peace envoy, former Maine Sen. George Mitchell, was leading a mediation effort, speaking directly with Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas.

At issue is the 10-month-old Israeli slowdown on settlement building — a near-halt to new projects aimed at coaxing the Palestinians into talks with the Netanyahu government.

The restrictions expire Sunday, only weeks after U.S.-sponsored talks were finally launched amid much fanfare. As the deadline looms the region has grown increasingly tense, fearing not only a collapse of the brittle peace effort but perhaps a return to violence as well — fears stoked by a bout of Palestinian rioting Wednesday near key Jerusalem holy sites.

The so-called settlement “moratorium” is far from a freeze on building, because thousands of housing units whose construction preceded November 2009 were allowed to continue under its self-declared terms.

But with several notable exceptions, new projects were not launched. The Palestinians want this extended, and the United States publicly backs the demand.

In a speech Thursday at the U.N. General Assembly , Obama called for an extension and said restrictions have “made a difference on the ground, and improved the atmosphere for talks.”

Netanyahu has refused — at least in part because key nationalist coalition partners are likely to rebel if he gives in.

Danny Danon, a deputy speaker of Israel’s parliament, said he will lead a rally with other hawkish lawmakers from Netanyahu’s Likud party Sunday in the West Bank settlement of Revava.

“We have decided that the best way to end the freeze is to begin building,” he said in a statement. “Cement trucks, bulldozers and other earth moving equipment are already in place in Revava and the activists plan on marking the last hours of the freeze by laying the foundations for a new neighborhood.”

But Netanyahu has signaled a willingness to seek a way out of the impasse, saying this month that the current restrictions on settlements will not remain in place, although there will still be some limits on construction.

Some in Israel have proposed a compromise — for example, that building might resume in some places but not return to the relatively unfettered construction that prevailed before the restrictions were imposed last year, under heavy U.S. pressure.

Abbas himself appeared to back away from the extension demand in comments late Tuesday to prominent American Jewish figures. “I cannot say I will leave the negotiations, but it’s very difficult for me to resume talks if Prime Minister Netanyahu declares that he will continue his (settlement) activity in the West Bank and Jerusalem,” he said.

The Palestinian ambassador to the United Nations later said the comments had been misconstrued, but did not deny them outright.