The Palestinians offered Israel major concessions on east Jerusalem and on the issue of refugees in 2008 peace talks, according to leaked documents angrily dismissed as "distortions" on Monday.
Details of the proposals emerged late on Sunday when the Al-Jazeera satellite channel began publishing the first of more than 1,600 documents known as the "Palestine Papers" which cover more than 10 years of secret Middle East peace talks.
The documents, which were also shared with British paper the Guardian, provoked surprise and anger among the Palestinian leadership, with chief negotiator Saeb Erakat dismissing them as "full of distortions" and president Mahmud Abbas insisting his government had nothing to hide.
Described by Al Jazeera and the Guardian as "the most important leak in the history of the conflict," the papers include hundreds of official Palestinian transcripts from private meetings with the Israelis.
Central to the revelations was a series of far-reaching Palestinian offers regarding Jewish settlements in occupied east Jerusalem which were made by in 2008, the scope of which were never made public.
During series of meetings that year, the Palestinians offered to let Israel keep all its settlements in east Jerusalem, with the exception of Har Homa, as well as the Jewish Quarter and part of the Armenian Quarter in the Old City.
But Israel rejected the offer, saying it did not meet their demands, the papers show.
Al-Jazeera said the concessions were offered during talks between Condoleezza Rice who was secretary of state at the time, Israel's then foreign minister Tzipi Livni, former Palestinian premier Ahmad Qorei, and Erakat.
"We proposed that Israel annexes all settlement in Jerusalem except Jabal Abu Ghneim (Har Homa)," the documents quote Qorei as saying.
"This is the first time in history that we make such a proposition," he said.
But "the Israeli side refused to even place Jerusalem on the agenda, let alone offer the PA concessions in return for its historic offer," it said.
Erakat was also said to have offered to accept the return of only 100,000 out of the Palestinians who fled at the establishment of the state of Israel in 1948 and their descendants, now numbering almost five million.
The documents also show how PA leaders had been "privately tipped off" about Israel's 2008-2009 war against the Gaza Strip ruled by the Islamist movement Hamas, the paper said.
The report comes as world powers seek ways to haul Israel and the Palestinians back to the negotiating table after direct peace talks broke down last September in a dispute over Jewish settlements.
The publication of the Palestine Papers provoked a furious response from Erakat, who was widely quoted throughout the documents, with the chief negotiator insisting the revelations had been "taken out of context and contain lies."
"Al-Jazeera's information is full of distortions and fraud," he told AFP.
Abbas, who is currently in Cairo for talks with Egypt's Hosni Mubarak, also said the Palestinian Authority (PA) had nothing to hide.
"With everything we have done -- in terms of activities with the Israelis or the Americans -- we have given the Arabs details," Abbas said in remarks published by Palestinian news agency Wafa. "There is nothing hidden from the Arab brothers."
The strongest reaction by far was from Gaza's Hamas rulers, who have always opposed any negotiation with Israel, with spokesman Sami Abu Zuhri saying the papers revealed "the ugly face" of the Ramallah leadership and "the level of its cooperation with the occupation."
There was no official Israeli reaction to the leaked documents, but in response to questions about the Palestinian offer in 2008, Livni, now the opposition leader, issued a statement saying she would "continue to maintain discretion of the talks, in order to protect Israeli interests."
"We do no intend to respond to internal Palestinian reports -- whether they are true or not," the statement said.
Elsewhere, outspoken Foreign Minister Avigdor Lieberman told public radio the revelations proved it was necessary to push for some kind of interim accord with the Palestinians.
"If (former premier Ehud) Olmert and Tzipi Livni did not manage to reach an agreement with the Palestinians, then it is a sign that they all reached the conclusion in the end that the only solution is a long term interim agreement," he said.
Washington said it was reviewing the documents, with State Department spokesman Philip Crowley saying: "We cannot vouch for their veracity" in a Twitter post.