A spokesman for Palestinian President Mahmoud Abbas says peace talks cannot resume until Israel also halts settlement activity in East Jerusalem. His comments come a day after Israeli Prime Minister Benjamin Netanyahu proposed a 10-month halt for new building permits for Israeli settlements in the occupied West Bank - a move welcomed by Washington.
After making what it called an "unprecedented step" towards achieving peace in the Middle East, Israel said the next move is up to the Palestinians.
Israeli government spokesman Mark Regev called on Palestinians to move quickly.
"We've called for a total cessation of all new settlement building for a period of 10 months," said Regev. "Now this is an important step and now I think the Palestinians have to answer in kind."
But instead of accepting the proposed halt in settlement construction in the Israeli-occupied West Bank, Palestinian leaders rejected the peace offering, as "nothing new".
A Palestinian authority spokesman, Abdullah Abdullah, said Israeli Prime Minister Benjamin Netanyahu must commit to a full settlement freeze, not a partial one.
"He should have said that he is ready to apply, to implement all the obligations that are necessary for the success of negotiations," said Abdullah Abdullah. " These obligations include the total freeze of settlements including the natural growth in all the occupied Palestinian territories including East Jerusalem."
Palestinians see East Jerusalem as the capital of their future state.
A spokesman for Palestinian President Mahmoud Abbas (Yasser Abed Rabbo) said any talks aimed at reaching a two-state solution must include Jerusalem.
"Without Jerusalem there is no way that we can move towards a genuine peace process," said Palestinians spokesman. "Jerusalem is part of the occupied territories [since] 1967."
Israel captured East Jerusalem in the 1967 Mideast war and annexed it in a move that was not recognized internationally. Israeli officials authorized new settlement construction there last week.
While Washington praised Mr. Netanyahu's gesture as a step forward, US Middle East envoy George Mitchell acknowledged the plan falls short. "As we and others have said many times, the way to move forward is to enter negotiations without preconditions and reach agreements on the two-state solution, a Jewish state of Israel living side by side in peace and security with an independent, contiguous and viable Palestinian state," said Mitchell.
Mitchell, who has been trying for months to negotiate a solution to the Israeli, Palestinian impasse, is scheduled to arrive in the region next month for further talks.