Israel's president has welcomed apparent concession by Palestinian President Mahmoud Abbas on a core issue in peace talks - Palestinian refugees.
Shimon Peres said Mr Abbas "understands that the solution to the Palestinian refugee issue cannot be in Israel's territory and to the detriment of Israel's character".
Mr Abbas told Israeli channel 2 TV that he does not want to live in his birthplace Safed, now in Israel.
In past negotiations, Palestinians have offered to forgo the return of refugees to homes inside Israel if compensated but rarely talk so publicly of relinquishing a long held aspiration. The Islamic militant group Hamas condemned Mr Abbas' comments.
The fate of refugees who fled or were forced to flee during Israel's creation in 1948 is one of the conflict's most emotional issues.