Israel's prime minister turned down a regional peace initiative last year that was brokered by then-US secretary of state John Kerry, former US officials confirmed.

The revelation, first reported by the Haaretz daily, was in apparent contradiction to Benjamin Netanyahu's stated goal of involving regional Arab powers in resolving Israel's conflict with the Palestinians.

Netanyahu took part in a secret summit that Kerry organised in the southern Jordanian port city of Aqaba last February and included Jordan's King Abdullah II and Egyptian President Abdel Fattah el-Sisi.

According to two former Obama administration officials, Kerry proposed regional recognition of Israel as a Jewish state - a key Netanyahu demand - alongside a renewal of peace talks with the Palestinians with the support of the Arab countries.

Netanyahu rejected the offer, which would have required a significant pull-out from occupied land, saying he would not be able to garner enough support for it in his right-wing coalition government.

The initiative also appeared to be the basis of short-lived talks with moderate opposition leader Isaac Herzog to join the government, a plan that quickly unravelled when Netanyahu chose to bring in nationalist leader Avigdor Lieberman instead and appoint him defence minister.

Herzog told Israel's Channel 10 TV on Sunday night the agreement "would have changed the face of the Middle East and the one who ran away at the end was Netanyahu".

Israel's opposition leader said the prime minister was ready to freeze settlement construction in most of the West Bank, but Netanyahu ultimately "blinked" under pressure from his hard-line allies.

Herzog tweeted on Sunday that "history will definitely judge the magnitude of the opportunity as well as the magnitude of the missed opportunity".

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Two former top aides to Kerry confirmed the meeting took place secretly on February 21, 2016.

According to the officials, Kerry tried to sweeten the 15-year-old "Arab Peace Initiative", a Saudi-led plan that offered Israel peace with dozens of Arab and Muslim nations in return for a pull-out from territories captured in the 1967 Middle East war to make way for an independent Palestine.

Among the proposed changes were Arab recognition of Israel as the Jewish state, recognition of Jerusalem as a shared capital for Israelis and Palestinians, and softened language on the "right of return" of Palestinian refugees to lost properties in what is now Israel, the former officials said.

The officials, speaking on condition of anonymity because they were still not authorised to discuss the secret meeting publicly, said the Egyptian and Jordanian leaders reacted positively to the proposal, while Netanyahu refused to commit to anything beyond meetings with the Palestinian President Mahmoud Abbas.

One of the officials said the main purpose of the meeting was to start a regional peace process that Netanyahu said he wanted. However, he said it was not clear if the Arab states would have gone along with it either.

He said it appeared that Netanyahu was not interested in doing anything beyond meeting with the Palestinian president and some Arab leaders and promising unspecified confidence building steps.

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This was not enough for anyone at the meeting and would not have been enough to get other Arab states to even express willingness to pursue a regional approach, the former official said.

"We saw it as building on, or updating, but certainly not superseding" the 2002 Arab initiative, one of the officials said.

A second former official said other Gulf Arab countries, including Saudi Arabia, along with the Palestinians, the Europeans and the Russians, were also consulted as part of the process.

The officials said opposition inside Netanyahu's government, which is dominated by nationalists opposed to Palestinian independence, presented a formidable obstacle.

But he said the Arab partners also showed varying degrees of enthusiasm, with the Palestinians most concerned about concessions forced on them.

Netanyahu himself did not address the report in his weekly Cabinet meeting and his office refused to comment. Instead, the prime minister focused on last week's visit to Washington to meet new President Donald Trump.

At that meeting, both Trump and Netanyahu talked of searching for new ways forward with the Palestinians and raised the possibility of involving the broader Arab world in a new peace process.

Netanyahu called the meeting "historic" and one that strengthened the two countries' longtime alliance. He said at the end of the meeting, Trump shook his hand and told him it was a "new day" in Israeli-American relations.

After eight years of testy ties with Barack Obama, Netanyahu seems to be relishing Trump's warm embrace.

The new president has broken from his predecessor in adopting friendlier positions to the Israeli government regarding a tough line on Iran, a vaguer stance on Palestinian statehood and a more lenient approach to West Bank settlements.

Netanyahu said the two leaders see "eye to eye" on Iran and a host of other issues. "There is a new day and it is a good day," he said.

But in a joint press conference last week, behind the warm smiles, there were signs of trouble ahead.

Trump asked Netanyahu to "hold off" on Jewish settlement construction in occupied territories the Palestinians claim for a future state. Netanyahu said Sunday that the sides have formed joint teams to coordinate settlement construction.

In a striking departure from long-time US policy, Trump also refrained from supporting a two-state solution to the Israeli-Palestinian conflict.