(Recasts, adds transition, DUP views)
LONDON, Nov 30 (Reuters) - Britain is close to clinching a deal with the European Union over the Northern Ireland border, a step that would pave the way for Brussels to offer a two-year Brexit transition deal as early as January, The Times newspaper reported on Thursday.
Avoiding a so-called "hard border" on the island of Ireland that many fear could disrupt the peace in Northern Ireland is the last major hurdle before Brexit talks can move to negotiations on Britain's future trade relationship with the EU.
The border between EU-member Ireland and Northern Ireland, which is part of the United Kingdom, will be the UK's only land frontier with the bloc after Brexit.
The Times said Britain had proposed committing the government to "avoiding regulatory divergence" in Ireland after Brexit, even if the rest of the United Kingdom moves away from European rules.
To do this, the newspaper said, the government in London would devolve a package of powers to Northern Ireland to enable customs convergence with the Irish Republic on areas such as agriculture and energy.
Irish Prime Minister Leo Varadkar said on Wednesday that progress had been made in talks on the issue, though it was not yet sufficient.
Dublin and EU officials say the best way to avoid a "hard border" is to keep regulations the same north and south.
But complicating any resolution of the issue is British Prime Minister Theresa May's reliance on a small Northern Irish party for her parliamentary majority in London.
The pro-Brexit Democratic Unionist Party (DUP), which strongly supports British rule in Northern Ireland, has said it will not countenance the province operating under different regulations to the rest of the UK.
"We will not support any arrangements that create barriers to trade between Northern Ireland and the rest of the United Kingdom or any suggestion that Northern Ireland, unlike the rest of the UK, will have to mirror European regulations," DUP leader Arlene Foster said on Saturday.
The role of both Irish nationalist and pro-British unionist parties from Northern Ireland in the Brexit talks has been hampered by their failure to restore the province's devolved power-sharing government since its collapse almost a year ago. (Reporting by Abinaya Vijayaraghavan in Bengaluru, writing by Guy Faulconbridge; Editing by Gareth Jones)