Israel on Thursday rejected President Barack Obama's call for a peace deal based the 1967 borders, as the Palestinians said their leadership would hold a meeting to discuss the US leader's policy speech.
Obama's address, billed as an announcement of reoriented US policy in the Middle East after a slew of regional uprisings, focused heavily on the stalled talks between Israel and the Palestinians.
He called for a negotiated solution based on the borders that existed before the 1967 Six Day War, but also warned the Palestinians that a bid for UN recognition of a unilateral proclamation of statehood would not work.
"The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognized borders are established for both states," said Obama.
"The Palestinian people must have the right to govern themselves, and reach their full potential, in a sovereign and contiguous state."
Israeli Prime Minister Benjamin Netanyahu, due to fly to Washington just hours after Obama's speech, immediately called on the White House to guarantee Israel would not have to withdraw to the 1967 lines.
He urged Obama to commit to the assurances laid out in 2004 by then president George W. Bush, who said "new realities on the ground," meant a "full and complete return" to the 1967 borders was "unrealistic."
"Prime Minister Netanyahu expects to hear a reaffirmation from President Obama of US commitments made to Israel in 2004, which were overwhelmingly supported by both houses of Congress," Netanyahu's statement said.
"Among other things, those commitments relate to Israel not having to withdraw to the 1967 lines, which are both indefensible and which would leave major Israeli population centres in Judea and Samaria (the West Bank) beyond those lines," it added.
Netanyahu is scheduled to meet with Obama on Friday and will address a joint session of the US Congress next week.
In the West Bank, the Palestinian leadership responded cautiously, saying it would examine Obama's address before making substantive comment.
Signup to our newsletter and follow us on Facebook and Twitter!
"President (Mahmud) Abbas decided to call the Palestinian leadership to an urgent meeting as soon as possible and consult with the Arab brothers to discuss US President Barack Obama's speech," senior Palestinian negotiator Saeb Erekat told reporters.
He said the Palestinians remained committed to all previous agreements with Israel, "hoping that the Israeli government will do the same, to give the peace process the chance it deserves."
The Hamas movement, which rules the Gaza Strip and this month signed a surprise unity agreement with Abbas's Fatah party, immediately called for Washington to match words with action.
"What Obama needs to do is not to add slogans but to take concrete steps to protect the rights of the Palestinian people and the Arab nation," Hamas spokesman Sami Abu Zuhri told AFP.
Obama's speech comes as talks between Israel and the Palestinians are mired in a stalemate over the issue of Israeli settlement construction.
In September 2010, Obama helped launch the first direct talks between the two sides in nearly two years, but they quickly ground to a halt when a partial Israeli settlement moratorium expired.
Netanyahu refused to renew the ban, and the Palestinians have refused to negotiate while Israel builds on land they want for a future state.
As Obama's speech began, an Israeli government committee announced approval for only 1,500 new homes in a settlement neighbourhood in annexed east Jerusalem, a non-governmental group told AFP.
The decision authorised construction of 620 homes in the settlement neighbourhood of Pisgat Zeev, and another 900 in a second settlement neighbourhood, Har Homa, said the Ir Amim organisation, which calls for Palestinians and Israelis to share Jerusalem.
Israeli lobby group Peace Now deplored the timing and content of the interior ministry's decision.
"The prime minister is sacrificing relations with the US for the sake of his loyalty to settlers," it said in a statement. "This is not just miserable timing but a miserable policy which endangers Israel's standing in the world."
"Netanyahu's decision to discuss Har Homa and Pisgat Zeev today is a clear message to the Americans about Israel's real policy which refuses to even discuss (sharing) Jerusalem," Hagit Ofran, of Peace Now's Settlement Watch unit, told AFP.