The mosque is promoted by a local Muslim fundamentalist group, which began its construction in front of the Basilica of the Annunciation.
Nathan Chtcharansky, Minister of Housing and Construction, was appointed to head a Ministerial Commission that will propose a solution to the government within the next two weeks, the radio station added.
In recent months, the Vatican, as well as leaders of Jerusalem´s Christian communities and of other countries, requested the Israeli government to halt the project, which is seen as a provocation by the Islamic group.
On several occasions in the past, promoters of the mosque´s construction physically attacked pilgrims leaving the Basilica of the Annunciation. Yasser Arafat and other Muslim leaders oppose the building project.
The foundations of the planned Muslim center were laid in mid-November, on a plot that is public land. Israel approved the construction of the mosque in 1999, but set limits to its dimensions.