At first blush, this would be huge — if true.  Israel has always maintained that the issue of final borders belongs in the negotiations for peace, and not a prerequisite.  If Reuters’ anonymous source, noted as “an Israeli official,” was right, this would be the biggest concession Israel could make short of conceding a part of Jerusalem:

Israel has agreed to a proposed formula for new peace talks with the Palestinians under which the border of their future state would be along lines that existed before the 1967 Middle East war, but with agreed land swaps, an Israeli official said on Thursday.

The official said that, were the Palestinians to accept the formula, it would be announced by U.S. Secretary of State John Kerry, who would also describe the future Palestine as existing alongside a “Jewish state” ofIsrael. A spokesman for Israeli Prime Minister Benjamin Netanyahu declined to comment.

Speculation has been rife that Kerry, now in the region for his sixth time since March in an effort to revive peace talks that deadlocked in 2010, may be close to a breakthrough.

Well, Netanyahu’s office didn’t decline to comment for long.  Shortly after this report came out, spokesmam Mark Regev called the report “untrue”:

Prime Minister Benjamin Netanyahu denied on Tuesday an official’s remarks that Israel had agreed to resume peace talks based on the borders of a Palestinian state being drawn along lines from before a 1967 Middle East war, and agreed land swaps.

Mark Regev, a spokesman for Netanyahu, said “the report is untrue,” calling Reuters with the statement after initially declining to comment on what the official said, speaking on condition of anonymity.

This kind of concession is almost unbelievable.  From a practical perspective, few in Israel believe the pre-1967 borders to be defensible — which is why it will take a lot of concessions in return during negotiations to get the Israelis to agree to it, especially from neighboring Arab states.  With Syria in the middle of a civil war with al-Qaeda on one side and Hezbollah on the other, now isn’t exactly a propitious time for Israel to blithely surrender its defenses and one of its biggest chits before anyone gets to the negotiating table.

This appears more like a clumsy attempt to push Israel into action by an outside party looking desperately to change the calculus in the standoff.