The US is holding discussions with Egyptian officials on a proposal for President Hosni Mubarak to resign immediately and hand over power to a transitional government that would be supported by the military, officials said.

The Barack Obama administration is working on the proposal for Mubarak to quit now and turn over power to a transitional government headed by Vice President Omar Suleiman with the support of the Egyptian military, New York Times quoted administration officials and Arab diplomats as saying.

Suleiman backed by Egyptian armed forces chief Lt. Gen. Sami Enan and defence minister, Field Marshal Mohamed Tantawi, would immediately begin a process of constitutional reform.

The NYT report said the proposal calls for the transitional government to invite members from opposition groups to begin work to open up the country's electoral system in an effort to bring about free and fair elections in September.

Mubarak, who has ruled Egypt since 1981, is under pressure to step down now following protests that have turned leaving eight people dead and over 800 injured. He has said that he is willing to step down at the end of his term in September, but has refused to quit now.

The protesters gathered at downtown Cairo's Tahrir square are unimpressed with Mubarak's statement and are determined to ensure that he is forced out of office immediately.

Officials said the proposal was one of several options being discussed with Egyptian officials in an attempt to persuade Mubarak to leave now.

They warned that the outcome of their effort depended on several factors, including Egypt's own constitutional protocols and the protesters in Cairo and other Egyptian cities.

Officials said there was no indication yet that either Suleiman or the Egyptian military was willing to abandon Mubarak.

"What they're asking cannot be done," the New York Times quoted a senior Egyptian official as saying.

The official cited clauses in the Egyptian Constitution that bar the vice president from assuming power.

Under the constitution, the speaker of parliament would succeed the president.

"That's my technical answer," said the official. "My political answer is they should mind their own business."

The US is also looking at whether American intelligence agencies had alerted White house about the crisis in Cairo after the collapse of the Tunisian government in January.

"At some point it had to have been obvious that there was going to be a huge demonstration," said Senator Dianne Feinstein, the Democrat who is chairperson of the Senate's Select Committee on Intelligence.

She said that intelligence agencies never sent a notice to her committee about the growing uprising in Egypt, as is customary in the case of major world events.

Stephanie O'Sullivan, a CIA official, said that they had been keeping track of instability in Egypt for some time and had concluded that the government in Cairo was in an "untenable" situation.

The media report said officials have told their Egyptian counterparts that if they support another strongman to replace Mubarak, but without a specific plan and timetable for moving toward democratic elections, the US Congress might react by freezing military aid to Egypt.