All settlements on occupied territory are considered illegal under international law
Palestinian officials have rejected an offer by the Israeli government to halt settlement construction if they recognise Israel as a "Jewish state".
The Palestinians said they already recognised the state of Israel, and that the real issue threatening peace talks was illegal settlement activity.
Israel has been under international pressure to renew its partial freeze on construction in the occupied West Bank.
The Palestinians have threatened to walk out of the talks over the issue.
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Israel and the Palestinians
Mid-East talks: Where they stand
Q&A: Resuming direct talks
Confusion surrounds Arab summit
Hope and anger as freeze expires
The direct negotiations only resumed last month after a 20-month hiatus, and no meeting has been held since the freeze ended on 26 September.
'Seizing initiative'
In a speech to the Israeli parliament on Monday, Prime Minister Benjamin Netanyahu said: "If the Palestinian leadership will say unequivocally to its people that it recognises Israel as the nation-state of the Jewish people, I will be prepared to convene my cabinet and request an additional suspension of building for a limited period of time."
"Undoubtedly such a step by the Palestinian Authority would be a confidence-building measure that will open a new horizon of hope as well as trust among broad parts of the Israeli public," he added.
Mr Netanyahu said he had made the offer to the Palestinian Authority "in quiet ways" last month, but that it had been rejected.
The chief Palestinian negotiator, Saeb Erekat, said Mr Netanyahu was "playing games" with his offer, and that there was no connection between settlements and the national character of Israel.
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Analysis
Wyre Davies
BBC News, Jerusalem
The swift rejection of this proposal by Palestinian negotiators would have come as little surprise to Benjamin Netanyahu.
He knew that no Palestinian official would, at least at this stage, agree to recognise Israel explicitly as a Jewish state.
This was a tactical gesture by an Israeli prime minister who has been shifting uncomfortably in the spotlight for several weeks as peace talks with the Palestinians have stagnated - and everyone was looking for him to make a move.
By offering a renewed building freeze in the settlements, with attached conditions, Mr Netanyahu is hoping that the spotlight will switch to the Palestinians.
Gambling that the tactic won't anger those in his own right-wing coalition who oppose the freeze, the key response now, will be that from the US.
Washington has been among those repeatedly calling on the Israel to extend the freeze.
If the Obama administration deduces that this is a genuine move on Israel's part, some pressure may have indeed been lifted from Mr Netanyahu's shoulders to those of Palestinian leader Mahmoud Abbas.
"I don't see a relevance between his obligations under international law and him trying to define the nature of Israel," he added. "I hope he will stop playing these games and will start the peace process by stopping settlements."
Israel has occupied the West Bank, including East Jerusalem, since 1967, settling close to 500,000 Jews in more than 100 settlements. They are considered illegal under international law, although Israel disputes this.
coppied by http://www.bbc.co.uk/news/world-middle-east-11519969
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