Israeli Prime Minister Benjamin Netanyahu favours an Israeli withdrawal from a village on the Lebanese border and will discuss the issue with cabinet ministers this week, a government source said on Sunday.

Israel's Haaretz newspaper said the United States was pressing Netanyahu for a pullout from Ghajar, which straddles the border between Lebanon and territory Israel captured from Syria in the 1967 Middle East war.

The United States, the newspaper said, believes Israel's withdrawal from Ghajar would be a goodwill gesture towards Lebanese Prime Minister Fouad Siniora and could bolster moderates in Lebanon before its June 7 general election.

The government source said Netanyahu, who meets U.S. President Barack Obama in Washington on May 18, would discuss the matter with cabinet ministers later in the week.

Netanyahu, the source said, "viewed favourably" a pullout from Ghajar.

Israel annexed Ghajar in 1981 along with the occupied Golan Heights in a move that has not won international recognition.

A pullout from Ghajar could also open a broader debate about the nearby Shebaa Farms, a stretch of territory controlled by Israel that Lebanon claims as its own but which the United Nations recognises as belonging to Syria.

Mark Regev, a spokesman for Netanyahu, declined to comment on the issue.