Washington has told Seoul the system must be scrapped if it wants to establish a bilateral investment treaty that would level the field for investors in both countries.
South Korea's film industry is keen to keep it intact.
"I understand the direction for the screen quota is going to be a reduction," Kang Chul-kyu, chairman of South Korea's Fair Trade Commission, told reporters.
He said the culture ministry, which has been reluctant to ease the quota, was currently reviewing the proposal.
South Korea's finance and trade ministries have proposed cutting back on the screen quota as a compromise.
The foreign ministry said in October the bilateral investment treaty would spur US investment and raise the prospects for an early free-trade agreement with Washington.
Talks over such a treaty, first proposed in 1998, have stalled mainly due to lack of progress over the screen quota.
A main source of disagreement is one clause in the proposed treaty that bars South Korea from requiring foreign-invested movie theatres to show locally produced films.
Two South Korean blockbuster films drew more than 10 million moviegoers alone from a population of 48 million last year, further fuelling debate on whether the local industry needs protection.
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