Thirty families living in five unlicensed apartment blocs in Beit El in the West Bank accepted on Wednesday a government proposal to move them, and physically relocate the buildings, while the state would also erect 300 new homes elsewhere in their West Bank settlement.

"We are peaceful people," the settlers said in a statement after overnight negotiations between Beit El's chief rabbi and Netanyahu aides. "Fraternal struggles rupture all of society ... and consume our creative energies, which are meant to be building up the nation."

Israel's Supreme Court had ruled that the apartment blocs, on Beit El's Ulpana hill, should be torn down by 1 July as they sit on privately owned Palestinian land.

That promised a major test for Netanyahu, who is loath either to upset his ultranationalist base or defy Israel's judiciary over policy in the West Bank.

Israel is already hard-put to defend settlement activity in the face of world opinion. Palestinians, who seek statehood in the West Bank and Gaza Strip, fear the enclaves built on land Israel captured in a 1967 war will deny them a viable country.

There was no immediate comment from Netanyahu spokesmen on the Ulpana deal. But an official briefed on the negotiations said the settlers' statement was accurate, and that the government would ask the Supreme Court to postpone the Ulpana razings until October so engineers can prepare.

Netanyahu wants to dismantle the structures and rebuild them elsewhere, to avoid footage of bulldozers and debris recalling Israel's removal of 8,000 Jews from Gaza, another Palestinian territory, in 2005. That pullout still stirs great settler resentment.

Some 311,000 Israeli settlers and 2.5 million Palestinians live in the West Bank. The United Nations deems all settlements in the West Bank to be illegal. Israel disputes this and has sanctioned 120 official settlements, most of them built on land which had no registered owner when it was seized in 1967.

But the anti-settlement group Peace Now says roughly 9,000 homes were built on land listed as owned by Palestinians. The fate of some of those houses is now in the hands of the Supreme Court, which is yet to rule on a number of ongoing cases.

Another demand by the Ulpana settlers was that Netanyahu guarantee there would be no more "absurd announcements and decisions about destroying blossoming neighbourhoods and communities".