Secretary of State John Kerry has reaffirmed US opposition to Israeli settlements after Prime Minister Benjamin Netanyahu accused the Palestinians of creating "artificial crises" over the issue.
Kerry arrived in the region late on Tuesday in a bid to keep fragile peace talks on track, as recriminations grew following three months of negotiations that appear to have made little progress in resolving the decades-old conflict.
His first meeting of the day was with Netanyahu, who denounced the Palestinians for threatening to quit the talks over Israel's continued settlement construction on land they want for their future state.
The Israeli leader told Kerry, who is on his seventh visit to the region in 10 months, he was "concerned about the progress" of the talks, accusing the Palestinians of fabricating reasons to avoid making tough decisions.
"I see the Palestinians... continuing to create artificial crises, continuing to avoid, run away from the historic decisions that are needed to make a genuine peace," Netanyahu said.
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"I hope your visit will help steer them back to a place where we could achieve the historical peace that we seek."
After nearly three hours of talks with Netanyahu, Kerry drove to the West Bank city of Bethlehem where he sought to play down the dispute.
"As in any negotiations, there will be moments of up and moments of down. It goes back and forth," he told the crowds gathered outside the Church of the Nativity, the traditional site of Jesus's birth.
But following more than two hours of talks with the Palestinians, including 40 minutes one-to-one with president Mahmud Abbas, he was quick to reiterate US opposition to the settlements.
"We consider now, and have always considered, the settlements to be illegitimate," Kerry said.
"I want to make it extremely clear that at no time did the Palestinians in any way agree, as a matter of going back to the talks, that they could somehow condone or accept the settlements.
"That is not to say that they weren't aware - or we weren't aware - that there would be construction."
He said Washington believes construction should be limited as much as possible in an effort to help create a climate for talks to be able to proceed effectively.
His remarks related to a bitter row that has erupted over Israeli moves during the past week to push ahead with construction of more than 3700 new settler homes.
Talks between the two negotiating teams which took place on Tuesday broke down over the issue, a senior Palestinian official told AFP.
Several Israeli officials have claimed the settlement announcements were in keeping with tacit "understandings" between the two sides linked to the release last week of 26 veteran Palestinian prisoners.
Their comments sparked furious denials from the Palestinians.
