US President Barack Obama is to meet the Israeli Prime Minister, Benjamin Netanyahu, for the first time since a row over settlements in East Jerusalem.
The afternoon talks at the White House will be closed to the media, a sign which correspondents say suggests the dispute may not be entirely resolved.
Last week Mr Obama said the approval of plans for 1,600 homes in Ramat Shlomo was not helpful to the peace process.
But on Tuesday, Mr Netanyahu reasserted Israel’s “right to build” in Jerusalem.
“The Jewish people were building Jerusalem 3,000 years ago and the Jewish people are building Jerusalem today,” he told the influential US lobby, the American Israel Public Affairs Committee (Aipac).
“Jerusalem is not a settlement. It’s our capital,” he added.
The Palestinian Authority is furious at Israel’s insistence on building on occupied territory. It sees it as a serious stumbling block to the resumption of talks, which have been stalled for more than a year.
Nearly 500,000 Jews live in more than 100 settlements built since Israel’s 1967 occupation of the West Bank and East Jerusalem. They are considered illegal under international law, which Israel disputes.
Mr Obama has largely refrained from commenting publicly on the announcement of new construction in East Jerusalem, which came while Vice-President Joe Biden was visiting Israel two weeks ago.
Instead, Secretary of State Hillary Clinton, along with Mr Biden and several top aides, has repeatedly criticised the Israeli government for jeopardising the indirect “proximity talks” being mediated by US special envoy George Mitchell.
In her own speech to Aipac on Tuesday, Mrs Clinton demanded that Israel move to restore confidence in the peace process, not least by extending the 10-month suspension of new building in the West Bank to include East Jerusalem.
She said the continued expansion of Jewish settlements undermined “mutual trust and endangers the proximity talks that are the first step toward the full negotiations that both sides want and need”.
“It exposes daylight between Israel and the United States that others in the region hope to exploit,” she added.
Mr Netanyahu last week proposed a series of “trust-building measures”, which Israeli officials said included an agreement to discuss all outstanding issues in the proximity talks, but not a construction freeze in East Jerusalem.
Settlements in occupied Jerusalem were an “inextricable” part of the city, he insisted on Tuesday, and would remain part of Israel under any peace agreement.
“Therefore, building in them in no way precludes the possibility of a two-state solution,” he added.
Mr Netanyahu said Israel wanted Palestinians to be “our neighbours, living freely” and called on Palestinian Authority President Mahmoud Abbas to “come and negotiate peace”.
He also warned that while the US could help resolve both sides’ problems, peace could not be imposed from the outside. BBC
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