US Secretary of State Hillary Clinton said that the "time is ripe" for Middle East peace, as Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas prepared for a second round of talks.
The most immediate dispute between the two sides surrounds a soon-to-expire curb on new construction for Israeli settlers in the West Bank.
The Palestinians want the curb extended beyond the current September 26 deadline, but Mr Netanyahu has suggested that at least some of the restraints will be lifted.
Mrs Clinton said on Monday that President Barack Obama's administration believes Israel should extend the moratorium, but she also said it would take an effort by both sides to find a way around the problem.
"We recognise that an agreement that could be forged between the Israelis and the Palestinians... that would enable the negotiations to continue is in the best interests of both sides," she said.
Mrs Clinton spoke with reporters during a flight from Washington to Egypt for the latest round of the current Middle East peace talks, which began earlier this month in Washington.
The settlement freeze is not the only obstacle in the way of launching the talks in earnest. The two sides are bickering over what to discuss first: security or borders.
Palestinian negotiator Saeb Erekat said that the agenda for the talks had been agreed upon in Washington.
"The agenda includes final status issues: Jerusalem, borders, settlements and refugees, security and prisoners," he told reporters. "If you want to pick the right path, borders should come first. If you don't want to reach (an agreement) pick some other paths."
A senior Abbas aide, Mohammed Ishtayeh, appeared to take a hard line on the issue of settlement construction, telling reporters in Sharm el-Sheikh that an Israeli extension of its partial freeze would not signal progress in the negotiations but rather progress in "confidence-building".