"We are thinking of negotiation," he said.
The admission that the Taleban know the whereabouts of America's most wanted man is interpreted in Washington as either a ploy to gain time or a deliberate snub to America.
White House Chief of Staff Andrew Card said: "The President has said we're not negotiating. They cannot be a party to these terrorist acts and if they are going to continue to be a party to the terrorist acts, they should not be in power."
British Prime Minister Tony Blair, who has committed troops, planes and warships to the military buildup around Afghanistan, said: "If they are not prepared to give up bin Laden, which they could do if they wanted to, then they become an obstacle that we have to disable or remove to get to bin Laden. So that's their choice."
President George W. Bush has warned that if the Taleban do not hand over bin Laden they will "share in his fate".
But a self-confessed former Taleban torturer and bodyguard to the regime's reclusive leader, Mullah Omar, doubts his former employers are in control of bin Laden. Hafiz Sadiqulla Hassani told the Daily Telegraph: "We laughed when we heard the Americans asking Mullah Omar to hand over Osama bin Laden. It is Osama bin Laden who can hand over Mullah Omar."
America, which already has covert forces inside Afghanistan, appears to be struggling to find bin Laden's hideout in mountainous country and among people with whom it has little in common.
US sources say the last solid lead on his location came from someone with "knowledge of the Taleban" who said bin Laden was in southern Afghanistan .
But even as America sends another aircraft carrier to bolster its force of 30,000 personnel, 300 aircraft and two carrier groups, the CIA is investigating leads placing bin Laden in Somalia, Chechnya and Pakistan's northwest frontier.
In Turkey, authorities detained a man believed to be a brother of bin Laden. Interior Minister Rustu Kazim Yucelen said a man named Abdullah bin Laden had been stopped at Istanbul airport.
Map: Opposing forces in the war against terror
Afghanistan facts and links
Full coverage: Terror in America