Israeli Prime Minister Benjamin Netanyahu is willing to tear down settlement outposts in the occupied West Bank in return for U.S. backing on its stance on arch-foe Iran, local media reported on Tuesday.

Netanyahu told his right-wing Likud faction on Monday that Israel would have to dismantle what it considers illegal outposts, as demanded by Washington, since the issue of Iran was more important, newspaper reports said.

"I identify the danger and that’s why I am willing to take unpopular steps such as evacuating outposts. The Iranian threat is above everything," the mass-selling Yediot Aharonot quoted Netanyahu as saying.

"There are things on which you have to compromise."

Since returning to the prime minister’s post on March 31, Netanyahu has repeatedly said that Iran’s controversial nuclear drive posed the biggest threat to Israel since its creation in 1948.

At his first meeting with Barack Obama in Washington last week, Netanyahu sought to win support for his stance from the new U.S. president, who has said he is open to dialogue with the Islamic republic.

Obama assured Netanyahu that his diplomatic efforts over Iran’s nuclear drive were not open-ended and told him that "settlements must stop" so that the stalled Middle East process could move forward.

Settlement outposts in the West Bank, which Israel seized from Jordan in the 1967 Arab-Israeli war, are those built without Israeli government approval. However, the international community considers all Jewish settlements on occupied land illegal.

"Soon we will have to take down outposts," Yediot quoted Netanyahu as telling the Likud MPs, most of whom oppose dismantling any settlements in the West Bank, which they consider part of biblical Israel.

"Our relations with the United States are important and we must preserve them," he said. "The situation today is not like the situation back in 1996 and 1999 (during his first term as premier). We mustn’t waste time.

"In this reality, we have to make decisions. We are going to have to subordinate our priorities to existential needs and reach as broad a national unity as possible to repel the danger," he said. 

Israel and Western powers fear Iran’s nuclear drive is a cover for efforts to built atomic weapons, claims repeatedly denied by Tehran which vowed to press on with its activities.

Israel itself is widely believed to be the only nuclear armed state in the Middle East but adopts a policy of neither confirming nor denying whether it has a nuclear arsenal.

Both Israel’s defense minister and army chief said this week that they thought chances were low that US dialogue would succeed in halting Iran’s controversial nuclear activities.

Under the 2003 international "roadmap" peace plan, Israel committed to dismantling outposts erected since March 2001 and a government commission later determined there were 26 such structures in the West Bank.

Although most members of his government fiercely oppose freezing settlement activity, Netanyahu became convinced during his Washington visit that he must press ahead with the policy, media reports said.

"The penny has dropped for Netanyahu," wrote Yediot. "He now knows that the Obama administration isn’t willing to concede the linkage… between Iran and the settlements," it said.

"If Israel wants Washington to help it stop Iran’s nuclear armament, it is going to have to hold up its end of the bargain… to stop expanding its settlements… and to remove the illegal settlement outposts."

Israel has repeatedly said it was not ruling out a military strike on Iran’s nuclear facilities, but U.S. officials have warned against such action.

(Alarabiya.net and Agencies)