JERUSALEM — The Palestinian president, Mahmoud Abbas, said Sunday that any American proposal for restarting Israeli-Palestinian negotiations must include East Jerusalem as part of a complete halt in Israeli settlement building.

It was not immediately clear whether Mr. Abbas’s position, which is consistent with Palestinian policy, would scuttle a proposed deal that the Americans hope will lead to resumption of the negotiations. In the past the sides have found ways to surmount such difficulties.

Speaking to reporters in Cairo after meeting President Hosni Mubarak of Egypt, Mr. Abbas said that he had received no official American proposal regarding the peace process, but that for negotiations to take place, “there has to be a complete halt in settlements in all the Palestinian lands, first and foremost in Jerusalem.” His remarks were carried by the official Palestinian news agency, Wafa.

Prime Minister Benjamin Netanyahu has been considering an additional 90-day moratorium on the construction of settlement homes in the West Bank in return for security and diplomatic benefits from the United States. Israeli officials said Sunday that Mr. Netanyahu was still waiting for a letter from the Americans spelling out the terms of the understandings. One issue needing clarification was the amount of a United States subsidy to Israel to acquire 20 advanced American fighter aircraft.

Mr. Abbas said in Cairo that American-Israeli military deals were not his concern, but that tying such deals to a resumption of the peace negotiations was “unacceptable.”

Mr. Netanyahu has said that when he receives the letter from the United States he will go to his 15-member inner cabinet, where he said he expected to win approval for the deal.

But two hard-line members of the inner cabinet, ministers from the ultra-Orthodox Shas Party, have threatened to vote against the deal unless they are assured that building could continue in East Jerusalem, which Israel annexed after capturing it from Jordan in the 1967 war. The annexation has never been recognized internationally, and the Palestinians claim the area as the capital of a future independent state.

Mr. Netanyahu also faces strong opposition within his own conservative Likud Party for any further settlement moratorium. Thousands of opponents, mainly schoolchildren bused in from the settlements, demonstrated against the 90-day freeze outside the prime minister’s office on Sunday.

Israel and the Palestinians began direct peace talks in Washington in early September, but a short time later, the Palestinians suspended the negotiations when an earlier 10-month Israeli moratorium on West Bank construction expired.

Israel insisted that the last moratorium did not apply in East Jerusalem, and that the same would be true this time.

The United States will not explicitly endorse Israeli building in East Jerusalem. Washington greeted the recent advancement of plans for more than 1,000 new Israeli housing units in East Jerusalem with dismay.

But the Americans made do in the past few months with an Israeli commitment to avoid surprises and acts that could be deemed provocative.

As part of its proposed deal with the Israelis, the United States is also said to have offered Israel diplomatic support that could lead to a veto of any Palestinian plans to seek United Nations Security Council recognition for a state.

In a move that could further increase tensions with the Palestinians, the Israeli government on Sunday approved a $23 million, five-year project to renovate and develop the Western Wall Plaza and its environs. One of Judaism’s holiest sites, the Western Wall is located in the Old City, in disputed territory across the 1967 lines.

The plaza for worshipers and visitors abuts a remnant of the retaining wall of the mount, which is revered by Jews as the site where their ancient temples once stood. Al Aksa Mosque now sits on the top of the mount.

Also on Sunday, two Israeli soldiers received a three-month suspended prison sentence and were demoted to sergeant from staff sergeant for using a 9-year-old Palestinian boy as a human shield by forcing him to check bags for explosives in Israel’s 2008-09 Gaza war.

The two were convicted last month in an Israeli military court. Fellow soldiers and other supporters expressed relief at what they viewed as a relatively light sentence imposed by a judge, who said the soldiers’ misconduct had to be balanced against the difficult circumstances in which they were operating.

These were the first serious convictions in Israel’s criminal investigations into the conduct of its soldiers during the three-week Gaza invasion that began in late 2008 and was aimed at stopping rocket fire at Israeli communities.

In July, the army indicted several officers and soldiers for actions during the offensive. Several cases are still in progress.