Jerusalem: Jailed Palestinian leader Marwan Barghouti could be released in return for a former US Defence Department official being freed following a life sentence for spying for Israel in 1985.

Israel's Army Radio reported that Israel plans to propose the swap when acting Prime Minister Ehud Olmert is sworn in.

Although Israeli officials have publicly ruled out Barghouti's release, it is believed Israel is hoping to convince the United States that freeing him would weaken the new Hamas-led Palestinian government.

The speculation is based on information from an anonymous Israeli official who said, "The proposal has chances of being accepted, given the growing anarchy within the Palestinian authority and the possibility that Barghouti would act as a counterweight to Hamas."

Former navy analyst Jonathon Pollard, an American Jew, is serving a life sentence after being arrested for giving thousands of secret documents about US spy activities to Israel in the mid Eighties.

West Bank Fatah leader Barghouti was given five life sentences by an Israeli court on June 6 after it ruled that he was directly responsible for anti-Israeli attacks which killed five people.

A spokesman for the Israeli foreign ministry said he "had no knowledge of such a proposal", and went on to describe the report as "surprising".

Stewart Tuttle, a spokesman for the US Embassy in Tel Aviv, said, "The Pollard case is over. He is serving a sentence, as for Barghouti, that is something for the Israelis to decide."