Israeli troops would withdraw from the line, and security would be overseen by the ISF and a specially trained Palestinian police force.
Training for that force in Egypt has not begun and is expected to take months.
The ISF is hoped to be about 5,000-strong, with troops from Morocco, Kosovo, and possibly Albania and Kazakhstan.
An official familiar with the planning said late 2026 is the target, adding, "If we got this done by December, I'd be very happy."
Preference for settlement in the pilot camp would be given to former residents of the Rafah area.
Critics, including former Israeli Prime Minister Ehud Olmert, have denounced the scheme as a potential concentration camp, though BoP officials deny this.
A wider range of relief items would be allowed in, but Israel insists on permitting only humanitarian aid, not reconstruction materials.
It remains unclear where funding will come from, as very little of the original $17 billion pledge has materialized.
The EU's Palestine Donor Group raised €883 million for Gaza, intended for complementary water and sanitation infrastructure.
The BoP is negotiating to divert some of the $11 billion in Palestinian tax revenue and frozen bank assets withheld by Israel to project funds.
This suggestion has angered the Palestinian Authority (PA) in the West Bank. "These are not Israeli funds to withhold or bargain with," said PA Foreign Minister Varsen Aghabekian.
"These funds must be released immediately and unconditionally."
Aghabekian said the shift to a small pilot project presents a dilemma for Palestinians. "The humanitarian catastrophe cannot be managed through fragmented or partial measures.
At the same time, every effort that genuinely saves Palestinian lives deserves careful consideration."
She added, "Our concern is that temporary arrangements must never become a substitute for a comprehensive solution or serve to normalise an unacceptable reality."
According to an official familiar with the Cyprus talks, the NCAG was split over whether to go along with the Rafah pilot scheme.
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Members feared it would prove divisive within Gaza's 2.1 million Palestinian population, placing the majority on a lower priority tier for humanitarian relief.
