The paper said Jordanian officials presented the plan to the Israelis, acting with the knowledge and on behalf of King Abdullah II, who prefers, however, that his name not be linked to the initiative.
Under the plan, the confederation would be headed by the Jordanian monarch, but both parts of the state will have considerable independence, as well as their own governments.
During the Arab-Israeli wars of 1948-49 and 1967, the Western Bank of the Jordan River and East Jerusalem were part of Jordan.
Amman waived its claims to Palestinian lands in the late 1980s.
Jordan links its consent to place Palestinian lands under its control to Israel's implementation of the so-called Arab or Saudi initiative - i.e., the liberation of territories occupied in 1967, and resolving the problem of Palestinian refugees, including their right to return to the Jewish state, the paper said.