RAMALLAH, West Bank, Jan 25 (Reuters) - President Mahmoud Abbas is studying a US proposal for talks between the Palestinians and Israel at a level below full-scale negotiations between their leaders, a Palestinian official said on Monday.

The proposal is the latest idea by US Middle East peace envoy George Mitchell to bring about a resumption of peace talks that have been frozen for 13 months.

Palestinian sources familiar with Mitchell's weekend round of diplomacy said he had proposed confidence-building measures that would improve conditions in the Palestinian territories.

Israeli officials, noting that Prime Minister Benjamin Netanyahu had on Sunday welcomed unspecified new ideas for talks from Mitchell, said their government stood ready to take part in US-mediated discussions with Palestinian officials.

The confidence-building steps cited by Palestinians as areas they would be keen to discuss included the transfer of authority from the Israeli army to the Palestinians in more of the West Bank's territory, the removal of some Israeli checkpoints and release of a number of Palestinian prisoners.

These measures would be discussed at a meeting of senior ministers from each side, but not the top leaders.

Israeli political sources said they were not aware of specific secondary issues, such as prisoners, that might be discussed with the Palestinians -- they spoke rather of talks at a ministerial or lower level that would look at narrowing differences over core issues in suspended peace negotiations.

Core issues include the future borders of a Palestinian state, the status of Jerusalem and fate of Palestinian refugees.

A year of US diplomatic efforts has so far failed to relaunch talks aimed at ending the decades-old conflict through a peace treaty agreeing to the creation of a Palestinian state in the West Bank and Gaza Strip.

Holding a low-level meeting with the Israelis that tackles issues related to the daily life of Palestinians will not be an alternative to political negotiations, said the Palestinian official, who spoke on condition of anonymity.

Abbas, who is facing US pressure to return to peace talks, would discuss Mitchell's ideas with Arab leaders over the coming days so that the Palestinian position will be backed by the Arabs, the official said.

Netanyahu said on Sunday he had heard some interesting ideas for renewing the (peace) process from Mitchell.

I also expressed my hope that these new ideas will allow for the renewal of the process. Certainly if the Palestinians express a similar readiness, then we will find ourselves in a diplomatic process, Netanyahu said.

A spokesman for the prime minister declined comment on Monday on the content of discussions with Mitchell.

The Palestinian official said Abbas would stick by his insistence on a full halt to Israeli settlement construction in the West Bank, including East Jerusalem, before any resumption of full peace talks. He has rejected a 10-month, partial Israeli freeze announced in November as insufficient.

U.S. President Barack Obama said in an interview published last week he had underestimated the difficulty of resolving the Middle East conflict and had set his expectations too high in his first year. (Additional reporting by Allyn Fisher-Ilan and Alastair Macdonald in Jerusalem; Writing by Tom Perry; Editing by Douglas Hamilton and Samia Nakhoul)