Palestinian President Mahmoud Abbas yesterday opened the first face-to-face Middle East peace talks in two years by demanding an end to Jewish settlements in the West Bank.

In response, Prime Minister Benjamin Netanyahu insisted that any agreement must assure Israel's security as a Jewish state.

With their introductory public statements the two leaders spotlighted the immediate problems that divide the two sides, even before this latest bid for an Israeli-Palestinian deal gets down to the core issues of borders, the return of refugees and the status of Jerusalem that must be part of any final settlement.

The negotiations formally began at the State Department, a day after President Barack Obama had held separate talks at the White House with Messrs Netanyahu and Abbas, and at a working dinner attended by King Abdullah of Jordan and the Egyptian leader Hosni Mubarak.

In her introductory statement before television cameras were ushered out of the ornate conference room, Secretary of State Hillary Clinton pleaded for both sides to make the compromises needed to end a dispute that has been unresolved for more than six decades. "I know the decision to sit at this table was not easy," said Mrs Clinton, who has been working with the special US envoy George Mitchell to relaunch direct negotiations that have been stalled for 20 months since the breakdown of the Annapolis talks launched by then-President George W Bush in November 2007.

Washington, she said, "understands the suspicion and scepticism felt by so many after years of conflict and frustrated hopes. But with their presence yesterday, both leaders had taken "an important step" towards lifting the shackles of history. Mrs Clinton emphasised, however, that although the US would do everything it could as a facilitator and mediator, it could not impose a solution. Agreement ultimately depended on the two parties themselves – for "a future of peace and dignity that only you can create".

The hope is that a settlement can be reached in a year, and the plan is for a follow-up meeting in mid-September in Sharm el-Sheikh, Egypt, and every two weeks thereafter until a deal can be reached, Mr Mitchell said yesterday. But despite ritual expressions of good faith from Mr Netanhayu and Mr Abbas, most experts are deeply doubtful of a successful outcome.

A first daunting hurdle comes on 26 September, when a self-imposed partial freeze on settlements expires after 10 months. Mr Abbas has said he will break off talks if settlement construction resumes, but Mr Netanyahu risks the collapse of his right-wing coalition if the halt is extended. Meanwhile, hardline settler groups are threatening to restart building at once, after the shooting by the radical Hamas group of four Israeli settlers near Hebron on Tuesday.

Hamas, which controls the Gaza Strip that would be part of a future Palestinian state, signalled yesterday that it would keep up its opposition. "These talks are not legitimate because the Palestinian people did not give any mandate to Mahmoud Abbas to negotiate on behalf of our people," a spokesman said.