In a February 2009 memo that reflects the delicate machinery of diplomacy at work, a senior U.S. diplomat assessed the newly elected leader was not only willing to cede West Bank land but also territory in Israel itself.
Netanyahu said this week that he believes secrecy is essential for negotiations to succeed. And in 20 months in office, including a short-lived round of negotiations with Palestinians, he has revealed very little about his vision for peace.
But the newly leaked memo indicates the head of a government dominated by nationalist and religious politicians opposed to broad pullouts from occupied land may be willing to go much further than commonly believed.
With hard-liners accusing him of abandoning his ideals, Netanyahu's office on Tuesday downplayed the leaked document and said he was already on record as favoring territorial concessions for peace.
WikiLeaks began publishing more than 250,000 leaked U.S. embassy cables over the weekend - and on Tuesday, Israeli media zeroed in on a confidential Feb. 26, 2009 memo.
In the memo, dated two weeks after elections that landed Netanyahu in office, a senior American diplomat said that during a meeting a few days before "Netanyahu expressed support for the concept of land swaps, and emphasized that he did not want to govern the West Bank and Gaza but rather to stop attacks from being launched from there."
Two seemingly innocuous words - "land swaps" - speak diplomatic volumes: They are understood to refer to Israel ceding land inside its recognized territory in exchange for being allowed to keep small parts of the West Bank where there are large concentrations of Jewish settlers.
This concept suggests a willingness to cede the vast majority of the Palestinian area occupied in 1967, and it was a key element of a proposal made two years ago by Netanyahu's predecessor Ehud Olmert. Olmert says he offered the Palestinians some 95 percent of the West Bank with "land swaps" compensating them fully, in terms of land mass, for the remainder.
Palestinian President Mahmoud Abbas has also endorsed the concept of "land swaps" - but he never embraced the Olmert offer. Olmert was hounded out of office soon after by a financial scandal and replaced by Netanyahu.
Asked on Monday whether he would be willing to duplicate the Olmert offer under the right circumstances, Netanyahu demurred.
"I can say that I will tell that to (Abbas) and to our American interlocutors when we actually engage in the final stages of a final settlement negotiation," he said. "That's how I negotiate."
Netanyahu noted that the ability to negotiate under a cloak of secrecy was critical to Israel's ability to reach a peace deal with Egypt in 1979. Had the Israeli public known that Prime Minister Menachem Begin was preparing to cede the entire Sinai desert, he suggested resistance might have scuttled the agreement.
That could explain why Netanyahu might agree to "land swaps" in private conversations only.
In public, he had been an outspoken critic of Olmert's offer. But after taking office, his positions gradually started to erode.
In mid-2009, Netanyahu endorsed the concept of forming an independent Palestinian state alongside Israel - something he had opposed for virtually his whole public career. A year ago, he agreed to a 10-month moratorium on settlement-building, which has since expired. In September, he opened peace talks with the Palestinians aimed at forging an agreement within a year, but they quickly stalled over Israel's refusal to extend the settlement moratorium.
The challenge negotiators face is great.
Netanyahu says Israel must retain a security presence in parts of the West Bank and keep east Jerusalem - home to sensitive Jewish, Muslim and Christian holy sites - as an integral part of its capital. Both demands are rejected by the Palestinians, who seek all of the West Bank and east Jerusalem, both captured by Israel in 1967.
Closing the gaps depends largely on Netanyahu moving still further toward the Palestinians - and the report by U.S. diplomat Luis G. Moreno suggested this is not outside the realm of possibility.
Netanyahu now faces unrest in his governing coalition, where pro-settlement hard-liners are pressuring him not to cave in to the American demands to renew the settlement curbs.
Danny Danon, a lawmaker from Netanyahu's Likud party, said members had met over the leaked memo and want to prevent more concessions.
"If the prime minister is trying to appease Obama, he risks losing the support he has within the Likud," he said.
Danon and his hardline cohorts may have reason to fear, given Netanyahu's own words a day before: "Transparency is fundamental to our society, and it's usually essential - but there are a few areas, including diplomacy, where it isn't essential."