Israel agreed to a 10-month halt in construction in its West Bank settlements on Wednesday, drawing an immediate rejection from Palestinians because the freeze did not include east Jerusalem.
Shortly before Prime Minister Benjamin Netanyahu's televised statement, his Security Cabinet approved the freeze. Officials in his office said the vote of senior ministers and top security officials was 11-1 in favor.
Netanyahu said the "far-reaching and painful step" was designed to "encourage resumption of peace talks with our Palestinian neighbors."
The Obama administration welcomed Israel's decision, saying it was a step toward restarting Israeli-Palestinian peace talks.
Secretary of State Hillary Rodham Clinton issued a statement saying the Israeli decision was a helpful move toward resolving the Israeli-Palestinian conflict. The administration's special envoy for Mideast peace, former Sen. George Mitchell, also welcomed the move but said it fell short of a full settlement freeze.
"But it is more than any Israeli government has done before and can help movement toward agreement between the parties," he said, adding that he planned to return to the Mideast "in the near future" to resume his efforts to win agreement from the Israelis and Palestinians to return to the negotiating table.
The Israeli announcement came amid signs of trouble inwith the Palestinian militant group Hamas. Officials with Hamas said that Israel was objecting freeing some of the militants it wants in exchange for a captive Israeli soldier. Both sides have hinted of progress in recent days, raising speculation that a deal was imminent.
Palestinians already rejected the settlement freeze before the announcement because the it does not include construction in Jewish neighborhoods in East Jerusalem, which the Palestinians want as the capital of their future state. Israel captured east Jerusalem from Jordan in the 1967 Arab-Israeli war and annexed it soon after. The sector was entirely Palestinian at the time, but the construction of settlements has since attracted 180,000 Jewish residents.
Palestinian President Mahmoud Abbas has demanded a total halt to settlement construction before peace talks can resume. On Wednesday, chief Palestinian negotiator Saeb Erekat said there was nothing new in Netanyahu's announcement, pointing to the 3,000 new housing units under construction in the West Bank.
"This is not a moratorium. Unfortunately, we hoped he would commit to a real settlement freeze so we can resume negotiations and he had a choice between settlements and peace and he chose settlements."
The freeze announced by the Israeli leader applies only to new construction, meaning housing already underway will continue. Also, Netanyahu said, only new homes are included.
"We will not halt existing construction and we will continue to build synagogues, schools, kindergartens and public buildings essential for normal life" in the settlements, he said.
The U.S. stance appeared to be the key to the issue. Palestinians charge that the Obama administration has been vacillating over the settlement construction issue, first demanding a total halt, then appearing to side with Israel in agreeing to limited building.
Until Wednesday, Netanyahu resisted declaring a freeze beyond his pledge not to build new settlements. Netanyahu has said that peace talks must resume without preconditions, and issues like settlements should be discussed in negotiations.
Israel has been under heavy international pressure to halt its construction in settlements built on captured lands claimed by the Palestinians. Some 300,000 Israelis live in the West Bank, in addition to the 180,000 people living in Jewish neighborhoods in east Jerusalem.
Netanyahu earlier floated the idea of suspending construction in existing settlements. Wednesday's offer was the first time he has given a firm timeline for how long he is willing to stop the building.
Palestinian presidential adviser Nabil Abu Rdeneh said the proposed freeze would be unacceptable if it didn't include east Jerusalem.
"Any Israeli offer that doesn't include Jerusalem will be rejected immediately," he said in a phone interview from Argentina, where he was traveling with President Abbas. "No Palestinian, no Arab can cross this line."
Netanyahu, a traditional ally of the settler movement, has argued that some construction should be permitted to allow for "natural growth" in their communities. His latest offer applies only to "new construction permits" meaning that some 3,000 homes already approved for construction would not be affected.
More critically, it did not make any mention of east Jerusalem. The competing claims to the eastern part of the city home to sensitive Jewish, Muslim and Christian holy sites is the most intractable issue in the Israeli-Palestinian conflict.
Israel considers all of Jerusalem its eternal capital, and Netanyahu has repeatedly said he will not agree to share control of the city.