US Ambassador to Israel David Friedman has said Israel has the right to annex at least "some" of Judea and Samaria.
In the interview published by The New York Times on Saturday, Friedman said that some degree of annexation of Judea and Samaria would be legitimate.
"Under certain circumstances, I think Israel has the right to retain some, but unlikely all, of the West Bank," he said. He did not state what the US government's stance would be if Israel made such a move.
The establishment of a Palestinian Authority (PA) state in the areas Israel conquered during the Six-Day War of 1967 has been the focus of all past Middle East peace plans.
No firm date has yet been set for the unveiling of the Trump administration's plan although a conference is to be held in Bahrain later this month on its economic aspects.
The public comments made by administration officials so far suggest the plan will lean heavily on substantial financial support for the PA economy, much of it funded by the Gulf Arab states, in return for concessions on territory and statehood.
"The absolute last thing the world needs is a failed Palestinian state between Israel and Jordan," Friedman said in the Times interview.
"Maybe they won't take it, maybe it doesn't meet their minimums.
"We're relying upon the fact that the right plan, for the right time, will get the right reaction over time."
Friedman, a staunch supporter of Israel, told the Times that the Trump plan was aimed at improving the quality of life for PA Arabs but would fall well short of a "permanent resolution to the conflict."
He said he did not believe the plan would trigger PA Arab violence.
But he said the United States would coordinate closely with Arab ally Jordan, which could face unrest among its large population of PA "refugees" over a plan perceived as overly favorable to Israel.
Publication of the plan looks set to be further delayed after the Israeli parliament called a snap general election for September, the second this year.
The plan is regarded as too sensitive to release during the campaign.
During campaigning for the first general election in April, Israeli Prime Minister Binyamin Netanyahu pledged to annex Jewish settlements in Judea and Samaria, a move long supported by nearly all lawmakers in his alliance of right-wing and religious parties.
Earlier, in February, Netanyahu told lawmakers he had been discussing with Washington a plan that would effectively annex settlements.
Senior PA official Saeb Erekat said at the time that such a move would be tantamount to "US complicity with Israeli colonial plans."
In a rare public show of disunity between the close allies, the White House then flatly denied discussions on the subject.