JERUSALEM, July 8 (Reuters) - An Israeli newspaper reported on Wednesday Israel had won agreement from the United States for the continued construction of 2,500 housing units in Jewish settlements in the West Bank, despite U.S. calls for a freeze.

Israeli government spokesman Mark Regev said the United States and Israel have been trying to find common ground on the sensitive settlement issue, but he had no comment on the unsourced front-page report of a deal in the Maariv daily.

The report followed a briefing by Defence Minister Ehud Barak to Prime Minister Benjamin Netanyahu on his talks in London on Monday with U.S. envoy George Mitchell on ending a rift with Washington over its demand for a settlement freeze.

U.S. officials were not immediately available for comment.

Last month, U.S. and Western officials said Washington wanted Israel to impose a moratorium on launching new construction projects in settlements but were considering making allowances for buildings close to completion.

Palestinian leaders have said U.S.-backed peace negotiations with Israel could not resume unless there was a complete halt to settlement activity in the West Bank, Israeli-occupied territory where they hope to establish a state.

Maariv reported that Washington had agreed to the continued construction of 700 buildings, containing 2,500 housing units, in West Bank settlements.

A report in the Yedioth Ahronoth daily, Israel's most popular newspaper, was more cautious, saying Israel and the United States were "close to an agreement on settlements". It also cited the same housing figures.

Yedioth Ahronoth quoted unidentified cabinet ministers, who attended Barak's briefing, as saying reports of a U.S.-Israeli deal had been sealed were wishful thinking on the part of the defence chief.

While in London, Barak told reporters that he presented to the Americans "the scope of current construction work, which from a practical point of view can't be stopped".

Netanyahu, under U.S. pressure, has pledged not to build new settlements in the West Bank or expropriate more land. Further discussions are planned between Mitchell and Netanyahu as early as next week. (Writing by Ori Lewis; Editing by Janet Lawrence) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to http://blogs.reuters.com/axismundi)

AlertNet news is provided by