The Johansen family -- a couple in their 50s and their three children -- along with two other Danes were being held captive in the mountain village of Hul-Anod, Danish daily Ekstra Bladet said citing a local official.
Said Adam Ali, the mayor of Bander Beyla town in the country's restive northeastern Puntland region, told the daily that he sent his deputy mayor to the village to broker a deal with the abductors.
"He will make an offer to the pirates or we will grant amnesty if they release the Danish hostages without condition," he said.
The Danes were seized on February 24 some 300 nautical miles from Somalia.
According to the town mayor, the local Somali authorities respect Denmark's wish to negotiate with pirates but nonetheless are standing ready to use force if necessary.
"That's why we plan to encircle the zone where the pirates are located. We'd like them to stay in the village so that we may negotiate with them. Also because we would not like to have the hostages fall into other hands," he said.
The seven are in good health, he added.
Jan Qvist Johansen, his wife Birgit Marie, and their three children aged 13 to 17 years old left Denmark in August 2009 on a round-the-world trip by yacht. They had initially planned to return at the end of this summer. Two other friends were also on board the sailboat. AFP