"If all sides are willing to move off the rut that we're currently in, then I think there is an extraordinary opportunity to make real progress," said Mr. Obama.
In an Oval Office photo-op at the end of a meeting with Egypt's President Hosni Mubarak, Mr. Obama said he hopes for movement by the Israelis, the Palestinians and other Arab states.
"Everybody is going to have to take steps, everybody is going to have to take some risks," said Mr. Obama. He said an Israeli-Palestinian peace agreement is going to require a lot of hard work, but he said the U.S. "is committed to being a partner in this process."
He said his administration will devote "time, energy and resources" to bring about a mideast peace deal.
Mr. Obama views Egypt's Mubarak as in important participant in the process.
Speaking in Arabic, Mubarak said the Palestinians are the "pivotal issue" in the Middle East. That problem has defied resolution for 60 years, he said, and if it's not resolved now, it will trigger more mideast violence. Mubarak said he supports U.S. efforts to find a solution.
In the Egyptian leader's view, Israel and the Palestinians must move toward resolving the most difficult issues separating them including borders, refugees and the status of Jerusalem. He concedes resolving these matters "will not be easy," but he believes it's possible because Israelis and Palestinians alike want a better life.
Mr. Obama shares Mubarak's audacity of hope but says history shows that "just because something makes sense doesn't mean it happens."
He says a solution will require hard work and courageous leadership by both Israeli and Palestinian leaders.
He also wants the leaders of other Arab states to move toward normalization of relations with Israel as part of a comprehensive mideast peace agreement.