US President Barack Obama has called for Palestine and Israel to make "a leap together" and renew negotiations for a two-state solution encompassing an "independent, sovereign state of Palestine".
On the second day of his Middle East tour, Obama held talks with Palestinian Authority President Mahmoud Abbas in the West Bank city of Ramallah and addressed the construction of Jewish housing settlements on land claimed by the Palestinians.
"We do not consider the continuous settlement activity to be constructive or appropriate, or something that can advance the cause of peace," Obama said.
Abbas said Jewish settlements are illegal and undermine Palestinians' trust in the achievability of a two-state solution.
"Everybody considers settlements more than a hurdle toward a two-state solution. The Security Council issued more than 13 resolutions, not only condemning settlements but demanding ending and removing them because they're illegal," Abbas said.
"I hope that the Israeli government understands this. We hope they listen."
Obama indirectly criticised the construction of a new settlement in the E1 disputed area between Jerusalem and the Jewish settlement of Maale Adumim in the West Bank, to which Israel gave the green light after Palestine's successful bid to be recognised as a non-member observer state by the UN in December.
Obama said the US is "deeply committed "to the creation of an "independent and contiguous" Palestinian state. A Jewish settlement in the E1 area would cut the Palestinian West Bank in two.
However the President admitted that the settlement issue is "not going to be resolved overnight," as Israeli politics on the subject are "complex" and suggested that Palestinians should not make halting the settlements a condition to resuming peace negotiations with Israel.
Since Obama was first elected four years ago, the number of Israelis living in settlements in east Jerusalem and the West Bank has gone up from 500,000 to 560,000.
The president said he stills believes negotiations can bring the conflict to an end. However he said it is necessary for Palestinian and Israelis "to think new", setting aside old resentments and "push through some of the problems to get an agreement."
"People want to have 100 per cent of what they want instead of making needed compromise," Obama said. "Let's not use problems as an excuse not to do anything."
"There can be no real [peace] process with the continuation of settlement activities on our lands," Yasser Abed-Rabbo, an aide to Abbas said before the meeting.
Obama remained firm in condemning Hamas operate in the Gaza strip, praising the work of Abbas and Fatah in the West Bank instead.
"Hamas focuses only on tearing Israel down rather building Palestine up," Obama said.
He finally pledged to foster US financial aid to Palestinian authorities to help development in the region.