Sun Jan 25, 6:28 PM ET

RAMALLAH, West Bank (Reuters) - A top official of the main Palestinian militant group, Hamas, has said it could declare a 10-year truce with Israel if the Jewish state withdrew from territory occupied since 1967.

Abdel-Aziz al-Rantissi told Reuters late on Sunday Hamas had come to the conclusion that it was "difficult to liberate all our land at this stage, so we accept a phased liberation."

"We accept a state in the West Bank, including Jerusalem, and the Gaza Strip. We propose a 10-year truce in return for (Israeli) withdrawal and the establishment of a state," he said in a telephone interview from hiding in the Gaza Strip.

His comments appeared to strengthen signs of a big political shift by a faction sworn to destroy Israel and now seeming to move closer to the aims of Yasser Arafat's Palestinian Authority.

Israel dismisses any talk of Hamas moderation as a smokescreen for military preparations by a group at the forefront of suicide bombings.

Rantissi told Reuters late on Sunday any such new proposal would not mean that Hamas recognized Israel or spell the end of the Israeli-Palestinian conflict.

Hamas has led a suicide bombing campaign that has killed hundreds of Israelis during more than three years of violence.

It has rejected peace talks and demanded that a Palestinian state be formed on all the land that was Palestine under the British mandate preceding the creation of Israel more than five decades ago.

The spiritual leader of Hamas, Sheikh Ahmed Yassin, said recently the group could accept a Palestinian state in the West Bank and Gaza Strip -- territory occupied by Israel in the 1967 war, but he gave no indication how long that might ensure peace.

Rantissi said the truce could last 10 years, though "not more than 10 years."

Israel dismisses any hint that Hamas might be softening its stance, particularly after a suicide bombing killed four Israelis at a border crossing on January 14.

Israeli officials also say it would be impossible to return to pre-1967 borders, emphasizing that the Palestinians could not expect East Jerusalem, some major Jewish settlements or other land deemed vital for security.

Rantissi said discussion within Hamas on accepting a state in just the West Bank and Gaza was not new, but that "the movement has taken a decision on this."

Rantissi said he did not expect Israel to respond favorably to the new suggestion, "when it has rejected the Palestinian Authority's offer for less land than what we are proposing."

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