Occupied Jerusalem: Israel should withdraw from nearly all territory captured in the 1967 Middle East war in return for peace with the Palestinians and Syria, Prime Minister Ehud Olmert was quoted on Monday as telling a newspaper.

Olmert, in a caretaker role since quitting on September 21, said he was breaking new ground in calling for a broad pullback from the occupied West Bank and in the annexed Golan Heights, which Syria wants back.

"[I am saying] what no previous Israeli leader has ever said: we should withdraw from almost all of the territories, including in East Jerusalem and in the Golan Heights," Olmert, who resigned over corruption allegations, told the Yedioth Ahronoth.

According to Western and Palestinian officials, Olmert has proposed in peace talks with the Palestinians an Israeli withdrawal from some 93 per cent of the occupied West Bank, plus all of the Gaza Strip, from which Israel pulled out in 2005.

Olmert has said repeatedly that Israel intends to keep major Jewish colonies in the West Bank in any future peace deal with the Palestinians.

A peace agreement, he has said, would mean Israel would have to compensate the Palestinians for the land it hopes to retain by "close to a 1-to-1 ratio".

In exchange for the colony enclaves, Olmert has proposed about a 5 per cent land swap giving the Palestinians a desert territory adjacent to the Gaza Strip, as well as land on which to build a transit corridor between Gaza and the West Bank.