President Bush says remarkable progress is being made in the Middle East, and the likelihood of a Palestinian state is greater than ever. But at the same time he stresses both sides must take important steps for peace.

George Bush with Mahmoud Abbas at joint White House press conference

President Bush says he is more confident now about the prospects for peace than he was when he first took office five years ago. He says the path ahead will be difficult, but says the important thing is the Palestinian and Israeli leaders are now "partners in peace."

"Prime Minister Sharon wants there to be peace. President Abbas wants there to be peace. And both men are showing strong leadership toward achieving that objective," he said.

At a news conference following talks with Mr. Abbas, President Bush again called on the Palestinians to take steps to curb violence, and urged Israel to stop settlement expansion.

"Israel should not undertake any activity that contravenes its "road map" obligations or prejudices the final status negotiations with regard to Gaza, the West Bank and Jerusalem," said Mr. Bush.

In his response, President Abbas emphasized the need for a quick return to negotiations under the terms of the road map - the blueprint for peace drafted with help from the United Nations, the European Union, Russia and the United States.

The Palestinian leader said the recent Israeli withdrawal from the Gaza Strip opened a window of opportunity for progress. He stressed the challenge now is to keep that window open.

"The time has come to put an end to the Palestinian-Israeli conflict," said Mr. Abbas. "The time has come that the Palestinian people will attain their freedom and independence. The time has come to move quickly towards the resumption of permanent status negotiations."

Mr. Abbas said he gave President Bush an update on actions the Palestinian Authority is taking to move the process forward. He noted that Palestinian legislative elections will be held in about 100 days, and said an effort is being made to bring all parties into the political process. He did not mention any groups by name, including Hamas, but stressed the elections will be inclusive.

"All groups are underway to the electoral progress, so all groups will be part of the political Palestinian fabric," he added.

Israel has raised concerns about any participation in the electoral process by Hamas, which it considers to be a terrorist group.