After the slowdown ran out at midnight, there was no Palestinian statement about the future of the talks. The Palestinians asked for an Oct. 4 meeting of an Arab League body to discuss the situation, possibly giving diplomats an extra week to work out a compromise.
Minutes after the expiration, Israeli Prime Minister Benjamin Netanyahu called on the Palestinians not to walk away, but instead to maintain constant contact "to achieve a historic framework accord within a year." In a statement, Netanyahu said his "intention to achieve peace is genuine."
Palestinians have questioned whether they can make peace with Netanyahu, known as a hard-liner.
Israeli settlers were not waiting, celebrating the end of the slowdown and planning to send bulldozers into action in two places in the West Bank early Monday.
In Revava, a settlement deep in the West Bank, about 2,000 activists released 2,000 balloons in the blue and white of the Israeli flag at sundown Sunday. The balloons were meant to symbolize the 2,000 apartments that settlers say are ready to be built immediately.
"Today it's over and we will do everything we can to make sure it never happens again," settler leader Dani Dayan told the crowd. "We return with new energy and a new determination to populate this land."
It was unclear what how the official end of the slowdown would affect construction. Israeli Prime Minister Benjamin Netanyahu has already signaled future settlement construction will be kept to a minimum, in contrast to relatively unfettered housing activity of past Israeli governments.
"The settlement freeze has ended, but intense negotiations are ongoing in Europe, in the Middle East and in Washington to keep the peace talks on track," said CBS News foreign affairs analyst Pamela Falk.
Falk added that on Monday, Israel's Foreign Minister is expected at the U.N. while Palestinian leaders have called for an emergency meeting of the Arab League foreign ministers.
"A lot is going on behind the scenes to keep the peace negotiations going," Falk reports, "and at least a dozen nations are in the complex negotiations, with the White House weighing in, hoping the talks will not stall."
The Palestinians have said they will quit the negotiations if Israel resumes building, though President Mahmoud Abbas said in a published interview Sunday in the pan-Arabic daily al-Hayat that he would consult with Arab partners first to weigh his options.
Speaking in Paris Sunday, Abbas said, "There is only one choice in front of Israel: either peace or settlements."
The settlers' festivities went ahead despite Netanyahu's call for them to show restraint as the curbs are lifted. Palestinians oppose all settlements built on territories they claim for a future state, and renewed building could endanger negotiations launched early this month by the Obama administration.
The deadlock over settlements has created the first crisis in the negotiations, and U.S. mediators raced to bridge the gap between the Israelis and Palestinians. But a deal was far from certain.
U.S. Secretary of State Hillary Rodham Clinton spoke Sunday with Netanyahu and former British Prime Minister Tony Blair, the representative of the "Quartet" of Mideast peacemakers, State Department spokesman P.J. Crowley said. "We keep pushing for the talks to continue," Crowley said.
A U.S. official who was not authorized to speak publicly about the U.S. involvement in the peace process said talks among the U.S., Israeli and the Palestinians were taking place Sunday.
"They are talking. Intense efforts are ongoing," the official said.
Abbas faces intense internal pressure from his supporters not to relax his conditions. Also, the rival Islamic Hamas, which controls Gaza, opposes peace talks with Israel in principle.
"The Palestinians have to choose between sitting down and talking with us, and turning their backs on us, and missing another historic opportunity to reach peace," Michael Oren, Israeli Ambassador to the United States, told CBS News.
Israeli police said Palestinian gunmen shot and lightly wounded an Israeli motorist in Hebron, close to where a deadly shooting earlier this month killed four Israeli settlers.
Netanyahu, under pressure from pro-settler hard-liners in his governing coalition, said he would not extend the slowdown on construction he imposed 10 months ago. The curbs, which expire at midnight, prevented new housing starts in the West Bank, though the government allowed thousands of units already under construction to be finished.
A similar, but undeclared, slowdown has also been in place in east Jerusalem, the area of the holy city claimed by the Palestinians.
The deadline had not yet expired when several dozen settlers groundbreaking ceremony for a new kindergarten Sunday in the Kiryat Netafim settlement.
"For 10 months, you have been treated as second-class citizens," Danny Danon, a pro-settler lawmaker in Netanyahu's Likud Party, said at the ceremony. "Today, we return to build in all the land of Israel."
In nearby Revava, a settlement of about 130 Orthodox Jewish families in the rocky hills of the northern West Bank, the crowd included young activists, men wearing trademark knit skullcaps favored by religious settlers and foreign supporters from Norway and China.
Netanyahu imposed the slowdown last November in a bid to draw the Palestinians back to the negotiating table. The Palestinians initially rejected the offer as insufficient, but in recent weeks they demanded that the measures remain in place.
The Palestinians say Israeli construction in the West Bank cripples plans for a viable Palestinian state. Some 300,000 Israelis live in West Bank settlements, scattered among 2.5 million Palestinians. Another 180,000 Israelis live in east Jerusalem.
In practice, the slowdown brought about only a slight drop of about 10 percent in ongoing construction, but it cut new housing starts by about 50 percent, according to the dovish Israeli group Peace Now. That means the slowdown could have far more impact if it remained in place.
In a television interview, settler leader Dayan acknowledged it would take time for work to really begin.
"Whoever thinks that tomorrow there will be some kind of earthquake and there will be bulldozers wherever you look is wrong. That is not going to happen. It's a process and takes a while," he said.
U.S. Secretary of State Hillary Clinton held talks with senior Israeli and Palestinian officials over the weekend in hopes of forging a deal on settlement construction.
Before boarding a plane back to Israel, Israeli Defense Minister Ehud Barak told the BBC late Sunday that chances of success were "50-50." The chief Israeli and Palestinian negotiators remained in the U.S., leaving a window open for a last-minute agreement.
One of Obama's chief advisers, David Axelrod, told ABC News that efforts were continuing.
"We're very eager to keep these talks going," he said. "We are going to urge and urge and push throughout this day to - to get some kind of resolution."
Despite the tensions, there have been signs of compromise. Senior Palestinian officials told The Associated Press last week they were prepared to show "some flexibility."
Abbas ruled out a violent response.
"We won't go back to that again," he said.