Pope Francis called on Tuesday for Israel and the Palestinians to "resume negotiations" and "take courageous decisions", the Vatican said in a statement, after a meeting between the pontiff and Israeli president Shimon Peres.
"A speedy resumption of negotiations between Israelis and Palestinians is hoped for," it said.
"With the courageous decisions and availability of both sides, as well as support from the international community, an agreement may be reached," it added.
Such an agreement should "respect the legitimate aspirations of the two peoples, thus decisively contributing to the peace and stability of the region."
The meeting, the first between a leader from the Middle East and Francis, who was elected in March, came at a time of important developments in peace talks between Israel and the Palestinians.
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Peres also invited Pope Francis on an official state visit to Israel.
On Tuesday, Israel's lead peace negotiator Tzipi Livni praised as "important" a concession by the Arab League that Israel and the Palestinians could trade land in a bid to move the peace process forward.
The development emerged out of talks in Washington between US Secretary of State John Kerry and an Arab League delegation to discuss the 2002 Arab Peace Initiative.
The proposal would see 22 Arab countries normalising ties with Israel in return for a withdrawal from lands it occupied during the 1967 Six Day War.
During the meeting, Peres and Francis also expressed "worry for the conflict that plagues Syria" and hoped for a political solution to the crisis, the Vatican said.