The offer is the centerpiece of a diplomatic push by Egypt's new Islamist president, who is hoping his "Islamic Quartet"—grouping Turkey, Saudi Arabia and Egypt, all supporters of the Syrian rebellion, with Syria's top regional ally Iran—can succeed where other initiatives have failed.
The grouping is the first major effort to involve Iran in resolving the crisis. But it may be a tough sell. Tehran's influence in the Middle East is strongly tied to its alliance with Assad and his fall would be a major blow. Moreover, the quartet members themselves have their own divisions. Sunni powerhouse Saudi Arabia, along with other Gulf Arab nations, has been staunchly opposed to any Iranian expansion and may resist ending Tehran's isolation.
Egyptian President Mohammed Morsi made the offer when he met last month with Iranian President Mahmoud Ahmadinejad in Tehran, officials close to the Egyptian presidency said. Morsi's visit to Iran, to attend a summit of the 120-nation Nonaligned Movement, was the first by an Egyptian president since the 1979 Islamic Revolution there, when diplomatic ties between the countries were cut.
Morsi offered a package of incentives for Tehran to end its support of Assad, the officials said.
Cairo would agree to restore full diplomatic ties, a significant diplomatic prize for Iran given that Egypt is the most populous Arab nation and a regional powerhouse. Morsi would also mediate to improve relations between Iran and conservative Gulf Arab nations that have long viewed Shiite Iran with suspicion and whose fears of the Persian nation have deepened because of Iran's disputed nuclear program.
Also, Morsi offered a "safe exit" for Assad, his family and members of his inner circle.
The officials spoke on condition of anonymity to discuss the terms of the offer. They did not give a timeframe for the offer or say what Ahmadinejad's response was.
Morsi's argument is that neither Assad nor the rebels fighting his regime appear to be capable of winning the civil war, creating a stalemate that could eventually break up the Arab nation with serious repercussions for the entire region, the officials said.
"Egypt is convinced that what is ahead in Syria under Assad will be much worse than anything the world has seen there so far," said one of the officials. "In view of this, Egypt believes that preventing more bloodshed will be a huge achievement."
Morsi, who took office less than three months ago as Egypt's first elected and civilian president, voiced his support for the rebels against Assad's "oppressive" regime in a speech at the summit in Tehran. The move angered the Iranians, but won accolades across much of the Arab world and in Washington. It also drove the point home to the Iranians that continuing to support Assad was untenable.
The Syrian conflict has defied diplomatic solutions. Cease-fires called for by the U.N. and Arab League have been still-born as Assad's regime pushed ahead with its military campaign to stamp out the rebels, who drove ahead with their effort to bring him down.
The Syrian conflict started in March last year with a wave of mostly peaceful protests calling on Assad to step down. The uprising has morphed into a ruinous civil war. Activists say at least 23,000 people have been killed so far and the U.N. refugee agency says more than a quarter of a million people have fled the country. The conflict also has a dangerous sectarian tone: Syria's Sunni majority make up the backbone of the rebellion, while the regime is dominated by minority Alawites, the Shiite offshoot to which Assad belongs.
Diplomats from the Quartet met in Cairo for the first time Monday, and Egypt said foreign ministers from the four nations would meet in the coming days.
One prominent Syrian anti-regime activist said Iran's participation in the group suggests it realizes that supporting Assad may not be workable in the long run.
"There is a consensus among the four that the Syrian conflict must end before the country disintegrates. If this happens, the fallout will touch everyone in the region," said Rami Abdul-Rahman, director of the British-based Observatory for Human Rights in Syria, an activist group that monitors violence and abuses in Syria.
"If left to its own devices, the war will continue for four or five more years," he said.
But abandoning Assad would be difficult. Iran provides Syria with substantial financial aid and weapons, both key for Assad to continue in his crackdown on rebels.
Syria is Iran's gateway to Lebanon, where the Shiite Hezbollah group is a longtime ally. Syria has been a firm friend of Iran for decades—the only Arab nation to side with it against Saddam Hussein's Iraq during their ruinous war in the 1980s.
Still, Iran needs allies now more than at any time in recent years as its fears grow of a possible strike against its nuclear facilities by Israel or the United States while a host of U.N. sanctions begin to hurt its vital oil industry. The U.S. and its allies believe Iran's nuclear program is aimed at producing weapons, a claim Tehran denies.
Ties with Egypt could bring other benefits. Iranian Oil Minister Rostam Ghasemi said Monday that talks were taking place with Egypt for Iran to sell it oil. There was no official confirmation from Egypt that such talks were taking place, but Cairo has in recent months suffered from acute fuel shortages, blamed in part on its dwindling foreign currency reserves and lower credit ratings.
The new head of Egypt's diplomatic mission in Tehran, Khaled Emarah, may have been referring to those talks when he told a seminar in Cairo on Tuesday that Iran enjoyed a "surplus" in the oil sector and that it cooperated with many foreign nations in that field. In Washington, the U.S. State Department said it was aware of the media reports on the talks, but "will not speculate on hypothetical scenarios."
It said the U.S. will continue to implement sanctions "and increase pressure on the regime" while helping other countries to find energy alternatives, the State Department said.
But while Morsi can deliver on restoring Cairo's diplomatic relations with Iran, he may have a difficult time persuading Gulf leaders to improve their relations.
Iran has for decades occupied three Gulf islands that the United Arab Emirates claims as its own. Bahrain accuses Iran of inciting its Shiite majority against the ruling Sunni family. Saudi Arabia also sees an Iranian hand in the intermittent unrest in its mostly Shiite, oil-rich eastern region. Gulf states have been alarmed by Iran's growing influence in Shiite-majority Iraq.
"This will be a difficult goal for Morsi to achieve success," said Jamie Chandler, a political science professor at Hunter College in New York City. "The countries involved (in the quartet) have historically strained relations. But, if the conversation focuses on exile (for Assad), then Iran will be the most likely sanctuary."
Associated Press reporter Bradley Klapper in Washington contributed to this report.