It said the conditions also include ending UN weapons inspections and the sanctions regime, a pledge not to haul Saddam or his cronies before court and action to halt any Israeli development of weapons of mass destruction.
The newsweekly said its information came from a Western and two Arab diplomats in Dubai, adding that the Iraqi leader could go into exile in Africa.
But it said the United States had so far rejected the conditions and that Egypt was now trying to persuade Baghdad to compromise over its demands.
Arab diplomats in the region have already said that Turkey is working with Egypt, Saudi Arabia and other Arab countries to convince Saddam Hussein to go into exile to prevent a US-led war.
Despite Arab and Turkish denials of having considered asking Saddam to step down and go abroad, the diplomats told AFP that such efforts were based on an initiative by Turkey, whose Prime Minister Abdullah Gul toured the region this month.
Speaking under cover of anonymity, they said the idea was that he would go into exile in return for assurances that he would not be prosecuted.
US President George W. Bush warned Tuesday that time was "running out" for Saddam.
The United States, which accuses Iraq of concealing weapons and programmes of mass destruction, is pouring troops into the Gulf, with 150,000 US ground, air and naval personnel expected to be ready to strike by mid-February.
Egyptian President Hosni Mubarak said Tuesday on his return from a visit to Saudi Arabia that Arab states and Turkey were trying to find a formula to head off war which would be acceptable to both Washington and Baghdad.
Several nations, including Russia, Egypt, Saudi Arabia, Libya and Mauritania, have denied offering asylum to the Iraqi leader - Sapa-AFP.
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