The Israeli cabinet’s legislative committee has voted through a proposal that, if passed into law, would require a two-thirds Knesset majority before parts of Jerusalem could be ceded to a future Palestinian state.

Since any viable peace deal will have to include changes in the status and borders of Jerusalem — at the very least the transfer of Arab neighbourhoods to the Palestinian state — such a law could become a major obstacle to a future agreement.

The law has yet to reach the Knesset but the vote in the ministerial committee is a clear indication that a large part of the coalition will vote in favour, despite the proposal originally coming from an opposition MK, Yaakov Litzman of United Torah Judaism.

Justice Minister Tzipi Livni, who is Israel’s chief negotiator with the Palestinian Authority and chair of the legislative committee, voted against the proposal along with Finance Minister Yair Lapid. But a majority of Likud, Yisrael Beiteinu and Habayit Hayehudi ministers were in favour.

Ms Livni is now trying to organise a second vote, the outcome of which could depend on the position of Prime Minister Benjamin Netanyahu. Mr Netanyahu has not expressed an opinion on the proposed legislation but his aides have said that he opposes a law that could tie the hands of Israeli negotiators. At this stage, an intervention by the Prime Minister could cause an angry reaction from Likud ministers and backbenchers.

In previous rounds of negotiations, the draft agreement proposed by Israel included the transfer of the Arab neighbourhoods within Jerusalem’s municipal borders to the new Palestinian state and various formulas for the joint control of the Old City and Temple Mount.

Palestinian and Israeli negotiating teams have been meeting more frequently, although both have agreed not to disclose details of the talks.

On Saturday, Palestinian President Mahmoud Abbas denied reports that the talks had reached a dead-end. He explained that the negotiations were still at an early stage and there was ample time within the nine months allocated to this round of talks to make progress on the various issues.

Former foreign minister Avigdor Lieberman responded in an interview on Sunday saying that the Palestinian leadership was encouraging terror and that, until the “incitement” ends, Israel has no partner in the negotiations and should instead focus on economic development and security co-operation with West Bank Palestinians.