Although no breakthrough was expected - and none was achieved - negotiators did agree to keep talking.
The talks were being held at the urging of the United States, which called on Israel and the Palestinians to negotiate directly to resolve differences over a U.S. initiative calling for Israel to withdraw from another 13 percent of the West Bank.
Eager to appear flexible, Prime Minister Netanyahu is promising an all-out effort to break the deadlock.
"This should proceed continuously, day and night, to conclusion, and we're prepared to do that," Netanyahu said.
If negotiators needed a reminder of what was at stake, they had one earlier in the day on a busy West Jerusalem street. Police said a van that caught fire during morning rush hour turned out to be an improvised car bomb loaded with flammable liquid. The averted blast could have been catastrophic.
Police said the driver - who had been previously jailed for being a member of a ``hostile organization'' - was hospitalized under heavy police guard with serious burns. Army radio said Palestinian security forces were cooperating in the investigation.
The likeliest culprits: Palestinian extremists, determined to give peace no chance at all.
The incident created a tense backdrop for the evening talks by Israeli Defense Minister Yitzhak Mordechai and Yasser Arafat's deputy Mahmoud Abbas. However, none of the participants - who also included chief Palestinian negotiator Saeb Erekat and Yitzhak Molcho, a senior aide to Prime Minister Benjamin Netanyahu - made statements as they headed into the negotiating session at a Tel Aviv hotel.
Beforehand, the Palestinians signaled their low expectations. Palestinian Cabinet minister Nabil Shaath said he thought the meeting had only a "very, very limited chance" of success.
"But for a chance of one percent we will go, because we don't want to be told that we have wasted an opportunity," Shaath, the planning minister, told reporters in the West Bank town of Ramallah.
Israel has so far balked, citing security concerns that Netanyahu said were underscored by Sunday's attempted attack in the center of Jerusalem.
The U.S. wants the two sides talking, but it wants more than talk alone. The Palestinians accepted the Administration's compromise plan weeks ago, Israel still has not. The U.S. says the ball is firmly in Netanyahu's court.