JERUSALEM -- Frustrated by years of on-and-off peace talks with Israel, Palestinians are losing hope for an independent homeland, and some are proposing a radically different cause: equal rights for Palestinians and Jews in a shared state.

Majorities on both sides dismiss the current U.S.-backed peace talks as futile. And a small but growing number of moderate Palestinians contends that Israel's terms for independence offer less than they could gain in a single democratic state combining Israel, the West Bank and Gaza Strip.

As a result, the 60th anniversary in May of Israel's birth is a time of insecurity and flux. Conventional wisdom about the long-standing formula for peace is being turned on its head.

No Israeli leader accepts the idea of sharing power with Palestinians; none has even offered such a plan. But a collapse of the two-state effort would leave Israel in de facto control of a region where by the next generation, Jews will probably be in a minority.

That scenario inspires Hazem Kawasmi, who recently gave up on the two-state ideal and runs brainstorming workshops in the West Bank on single-state proposals.

Sooner or later, the former Palestinian Authority official predicts, the growing burden of occupation and threat of Islamic extremism would make Israelis receptive to the idea of a bi-national system that protects the rights of Jews.

"Israel cannot be a dominating power forever," Kawasmi, 43, said in Ramallah, the West Bank's administrative center. "Time is on our side."

Israel captured the West Bank and Gaza in the 1967 Middle East War, but efforts to incorporate the territories by encouraging massive Jewish settlements fell short. It took a generation after the war for Israeli and secular Palestinian leaders to recognize each other and start discussing statehood for the occupied territories.

The Palestinians' rethinking of that goal has been influenced by Hamas. Its ascendancy has unnerved moderate Palestinians who don't want to be ruled by the militant Islamic group and made many in Israel, which Hamas refuses to formally recognize, more averse to a two-state accord.

The near-daily rocket attacks from Hamas-controlled Gaza have turned Israel's defense minister into a powerful critic of a peace process he once led.

U.S. Secretary of State Condoleezza Rice, struggling to propel peace talks between Israel and the Palestinian Authority led by the secular Fatah movement, warned last week that the lack of progress was causing younger Palestinians to give up on the goal of an independent state.

"Increasingly, the Palestinians who talk about a two-state solution are my age," said Rice, who is 53.

The U.S. revived the peace talks in November with the aim of an accord by the end of President Bush's term, but disillusionment set in quickly. Hebrew University and the Palestine Center for Policy and Survey Research reported that three-fourths of the Palestinians and just more than half the Israelis they polled in March believe the talks serve no purpose and should be halted. Other polls show that at least one-fourth of all Palestinians favor a single state.

"The number of people who believe in two states for two peoples is decreasing, and that worries me," said Yasser Abed-Rabbo, a Palestinian official involved in the talks. "And I'm talking about a circle of rational intellectuals, people with an open mind. On the street, the two-state idea has become a joke."

Fatah's leadership has begun a quiet, informal debate over its options if talks for an independent state fail. The emergence of one-state proposals, said Kadura Fares, a member of Fatah's revolutionary council, are "a sign that the current strategy has been exhausted and it's time to rethink all our goals."

Ali Jarbawi, an independent West Bank political scientist who advises the Palestinian leadership, has urged Palestinian Authority President Mahmoud Abbas to resign and abolish the government, which would oblige Israel to take direct responsibility for managing the West Bank and Gaza and paying public employees.

"I would say, 'Be my guest. Continue your occupation. But we're going to declare this is all one state and ask for equal rights. Are you going to be able to keep us under control for another 40 years?' " Jarbawi said.

In 2007, Israeli Prime Minister Ehud Olmert cited just such a scenario to make the case for shedding the territories quickly, while the Palestinians still have leaders who want their own state.

Israel, he warned, faces a demographic threat. There are now 5.7 million Jews and 1.4 million Arab citizens in Israel and its West Bank settlements, according to Israel's Central Bureau of Statistics; the bureau's Palestinian counterpart tallies nearly 3.8 million Palestinians in the West Bank and Gaza.

By 2025, Israeli demographer Sergio Della Pergola predicts, Jews will make up no more than 46 percent of the people living between the Jordan River and the Mediterranean Sea, an area slightly smaller than Maryland.

Rid of the territories, Olmert told reporters in November, Israel would have a sustainable Jewish majority within its borders, enabling it to preserve its Jewish character within a democracy.

"If the day comes when the two-state solution collapses and we face a South African-style struggle for equal voting rights, the state of Israel is finished," he said.

But resistance to a two-state accord has risen not only from right-wing allies of Olmert who support continued Jewish settlement in the West Bank but also from Ehud Barak, who leads the dovish Labor Party.

As prime minister in 2000, Barak made Israel's first concrete offer of a Palestinian state. The late Yasser Arafat rejected his terms. Now defense minister, Barak has privately dismissed the current talks as "a fantasy."

Until Israel upgrades its missile defenses, which could take a several years, Barak says he favors keeping troops in the West Bank and continuing frequent incursions into Gaza. Israel withdrew its army bases and civilian settlements from Gaza in 2005.

Many Palestinians take Barak's shift as a sign that independence is unattainable.

Kawasmi said his moment of disenchantment came in June 2007 during an encounter with Israeli peace activists at an unofficial Mideast forum in Italy.

The Jerusalem native had been campaigning 15 years for an independent Palestinian state. The dream had brought him home from studies in England in 1994 to help the newly created Palestinian Authority set up a ministry of economy.

But the Israeli peaceniks dismissed two cherished Palestinian aspirations. Like Olmert's government, they wanted to avoid talk of giving Palestinian refugees and their families the right of return to homes in Israel that they fled in 1948 or of sharing Jerusalem as capital of both Israel and a Palestinian state.

At that moment, Kawasmi said, he realized "there is zero chance" for a two-state solution. He didn't sleep well for months. Then he embraced the single-state option, which had been debated for several years among Palestinians living abroad, and set out to create a buzz for it in the territories.

Several dozen intellectuals and activists are engaged in the debate, in books, newspaper articles, seminars and discussions on such Web sites as Electronic Intifada. Some call for a power-sharing government, others for a federation with separate administrations for Palestinians and Jews.

Sari Nusseibeh, president of Al Quds University in Jerusalem, suggests that many Palestinians would feel more at home in a democracy shared with Israelis than in a Palestinian state run by Hamas.

A bi-national system, Nusseibeh said, would "need to come about by consent and not by force. It will need a complete new strategy and thinking." Perhaps after decades of fruitless bloodshed, he added, "we might find ourselves having no option but to coexist within one state."

A single state, other proponents say, would resolve disputes that have long bedeviled peace talks. Jews could keep their settlements, the thinking goes, but Palestinians, now restricted to a disproportionately small area, could live and travel anywhere the country. So could returning Palestinian refugees.

Many Israelis dismiss single-state proposals as recipes for dystopia or tactics in a Hamas-guided scheme to overrun the Jews and impose Islamic rule.

"Such an idea of one country with two peoples, it will never happen," said Benjamin Ben-Eliezer, the infrastructure minister. "Bloodshed will happen. The Arabs will not accept us. We will not accept them."

But Palestinians who favor the idea say they would have no problem living with Jews as equals. If Jews were to give up their superior status and allow Palestinians the right to vote and move about the country, they say, Islamic extremists would lose their appeal.

"I'm envisioning a state where Jewish, Muslim and Christian communities live equally with full rights," Kawasmi said. If Israelis cannot accept that, "it's up to them to face an Islamic power that will not accept them."

It might be months or years, he acknowledges, before Palestinian leaders embrace the single-state vision and another generation before Israelis take it seriously. He plans to spend the year hammering out a detailed proposal and getting it launched by a political party, even if he has to start one himself.

Israelis, meanwhile, are weighing the choices that will shape the country's seventh decade if the two-state talks fail: Israel could declare that the wall it has built along the length of the West Bank is now a border and retreat behind it, unilaterally defining an Israel with a Jewish majority but exposing itself to rocket fire. Or it could try to prevent the rockets by occupying the territory more thoroughly, and re-occupying Gaza, with the risks of long-term fatigue and international condemnation.

Either option could mean years of conflict, an outlook that weighs on Israel as it celebrates 60 years of Jewish national rebirth and achievement.

Meron Benvenisti, a historian and former deputy mayor of Jerusalem, is one of the few prominent Israelis who see a way out by sharing a state with the Palestinians.

He has proposed that Israeli Jews start debating the shape of such a state. They could best protect Israel's gains and the haven of a Jewish homeland, he suggests, by opting for a federal system with autonomous administrations for Jews and Palestinians.

"Israelis and Palestinians are sinking together into the mud of 'one state,"' he writes. "We need a model that fits this reality. ... The question is no longer whether it will be bi-national, but which model to choose."

Batsheva Sobelman of the Times' Jerusalem bureau contributed to this report.