Citizens of a town divided by the Israeli barrier are themselves split over possible reunification proposed in the Palestine papers

Mohammed Assad's vegetable stall stands in the shadow of the 8-metre-high concrete wall built by Israel which divides two formerly connected communities, Barta'a al-Garbiya and Barta'a al-Sharqiya.

According to leaked documents, the western, Israeli side of the town – Barta'a al-Garbiya – was identified by Israeli negotiators for transfer into a putative Palestinian state.

Its residents were not consulted about the transfer, but ask the mainly Israeli-Arab citizens which side of the line they would rather be on, and a lively debate ensues.

Assad, who from his own house can see over the wall to those of his relatives, would like the towns to be reunited. If that means the residents of both towns becoming citizens of a future Palestinian state, that's fine by him. "Why not?" he asked, trimming some cauliflowers. "As long as we can keep our homes. Life is ok over there. There is no money but people are living, they are not starving."

"No, no, no," interjected one of his customers, Khitam Salabi, 43. "If [the Palestinians] annexe us, we will be outsiders and refugees all over again. I am Palestinian but when I was annexed to the Israeli state, I became an Israeli, I had no choice."

The views of Faruq Mawasi, another customer, lie somewhere in the middle. "I am a Palestinian and I want to be a Palestinian forever. But we are Israeli citizens too. We have learned Israeli democracy and ways of life. We want to be Israeli citizens – even though they don't want us."

For the sake of a peace deal, Mawasi would be willing to swap his Israeli citizenship for a Palestinian one, as long as residents could keep their land and homes. "I would not be happy but I'd agree for peace and two states."

The two Barta'as are a complicated piece of a complicated jigsaw. The communities were united until the 1948 war and subsequent ceasefire line (or Green Line) between Israel and the West Bank was drawn down its middle. With Israel in control of the western half and Jordan in control of the eastern half, travel between the two became almost impossible.

In 1967, when Israel occupied the land east of the Green Line, the two halves were reunited. Then, in 2003, the vast concrete wall Israel built in this part of the West Bank sliced the community apart again.

Two years ago, according to documents seen by the Guardian, Israeli negotiators put forward the idea of drawing a new border around Israeli-Arab towns and villages such as Barta'a to take them entirely into a Palestinian state. It would be part of a land swap for Jewish settlements in the West Bank.

Lubna Athamneh, 36, pushing her children in a buggy down Barta'a al-Garbiya's main street, had heard the rumours. "They will send us to live in Palestine. I will not accept it. I like living here, and I don't want to leave. I will never leave my house."

The Israeli proposal, however, was not simple population transfer – putting people on buses and transporting them from one state to another – but "static transfer", drawing borders around Israeli-Arab communities to remove them from Israel and absorb them into a future Palestinian state. It is a plan enthusiastically advocated in the past couple of years by Israel's rightwing foreign minister, Avigdor Lieberman.

Sami Majdalawi, smoking a cigarette behind the counter of his falafel and shwarma cafe, was philosophical. "It's a choice between your mother and your mother-in-law," he said, referring to Palestine and Israel. "I prefer my mother. Over there, they are the same as us, they are our relatives. We share the same religion and culture." But, like others, he said he would "never, ever accept being forced to move".

Among a group of teenage boys walking home from school, three different opinions were voiced. Amir Majadleh would like to be a Palestinian citizen: "It's our homeland and we want to be with our people". Mustafa Sawalha, who identifies himself as a Palestinian who lives in Israel, is more cautious: "Over here there are laws, and over there, there are laws of the jungle". Izzadin Abu Hussein thinks of himself as an Israeli: "I'm used to living here and I don't want to become part of Palestine".

In a shoe shop in the centre of town, proprietor Hani Hgog was reluctant to see life change. Business was good, and he valued democracy and opportunity. "Over there you are either very rich or at the bottom," he said. "I'm living in this state as an Israeli, but inside I think of myself as Palestinian. Maybe we are used to a certain way of life. But I don't want to change it."