Sharon told a weekly cabinet meeting that he "does not rule out unilateral steps" in response to reports which said he was considering measures such as the dismantling of isolated settlements, a government statement said.

"However, the prime minister emphasised that his position is not yet fully formed, and that any plan will be submitted to the cabinet at the appropriate time," the statement added.

He also said he remained committed to the "roadmap", an internationally-backed peace plan which has ground to a complete halt in recent weeks.

Sharon's move comes amid preparations for a first meeting with his new Palestinian counterpart Ahmed Qorei, which suffered a blow late Saturday with the killing of two guards protecting Israel's controversial separation barrier.

Smarting from accusations that he failed to help bolster the position of the previous moderate Palestinian premier Mahmud Abbas, Sharon has been keen to avoid any suggestion that he is unwilling to give Qorei a chance to prove himself.

The prime minister also told the Yediot Aharonot daily that he was determined to make progress in the peace process despite recent criticism from the US.

"I just wanted the Israeli public to know that its prime minister has not stopped thinking how to get out of the impasse with the Palestinians," Sharon said.

The settlements which face dismantling are on the Palestinian side of a controversial barrier being built by Israel across the West Bank, or in areas which are considered difficult to defend, reports have said.

The "plan is meant simply to make things easier for Israel," Sharon was quoted as saying earlier by the Maariv daily.

"These are steps that can be taken without undermining security and their purpose is to make things easier for us and not for others."

Meanwhile, three Palestinian Islamists were expelled Sunday night by Israel to the Gaza Strip from the West Bank, raising to six the number of such punishments carried out this month, Israeli military sources said.

The Israeli government also announced it would release 10 Jordanian prisoners as a goodwill gesture towards its neighbour on the eve of the Muslim festival of Eid al-Fitr.