In a televised, prime time speech that?was seen as a response to President Obama's address in Cairo, Netanyahu said it is time for peace:
"I call on you, our Palestinian neighbors, and to the leadership of the Palestinian Authority: Let us begin peace negotiations immediately, without preconditions. Let's make peace. I am willing to meet with you any time any place — in Damascus, Riyadh, Beirut and in Jerusalem."
He rebuked the President Obama's call to end settlement expansion in the West Bank, and he said Jerusalem will remain united, under Israeli rule. The Palestinians want East Jerusalem as their capital.
But Palestinian spokesman Saeb Erekat dismissed the proposal: "Netanyahu's speech closed the door to permanent status negotiations. We ask the world not to be fooled by his use of the term Palestinian state because he qualified it. He declared Jerusalem the capital of Israel, said refugees would not be negotiated and that settlements would remain."
The White House, though, said Obama welcomed the speech as an "important step forward."
The hardline Netanyahu has always resisted withdrawing from the disputed territories for security and ideological reasons, calling Israel the biblical "birthplace of the Jewish people." But under pressure from the U.S. and moderates in his own government, Netanyahu is softening his stance:
"If we get this guarantee for demilitarization and necessary security arrangements for Israel, and if the Palestinians recognize Israel as the state of the Jewish people, we will be willing in a real peace agreement to reach a solution of a demilitarized Palestinian state alongside the Jewish state."
What remains in question are the 300,000 Jews living in West Bank settlements, and the 180,000 Israelis living in East Jerusalem -- land the Palestinians say is theirs. Netanyahu made no mention of giving up that land, and said those neighborhoods may need to grow:
"We have no intention to build new settlements or expropriate land for expanding existing settlements. But there is a need to allow residents to lead a normal life. Settlers are not the enemy of the nation and are not the enemy of peace — they are our brothers and sisters."
The speech was not well received by Palestinians. Hamas spokesman Sami Abu Zuhrii termed it "racist" and called on Arab nations to "form stronger opposition" toward Israel. Another Palestinian spokesman, Nabil Abu Rdeneh, said: "What he has said today is not enough to start a serious peace process."