Israeli and Palestinian leaders held new talks about an old problem at their first summit in the new round of peace talks.
At issue was Israeli building plans for a disputed part of Jerusalem.
Palestinian President Mahmoud Abbas was demanding a freeze, appealing to US Secretary of State Condoleezza Rice ahead of the meeting to put pressure on Israel.
The meeting between Abbas and Israeli Prime Minister Ehud Olmert in Jerusalem, is the first since the two men formally relaunched peace talks at a US-sponsored conference last month.
The Jerusalem dispute has already clouded meetings of negotiating teams since the gathering in Annapolis, Maryland.
Last month, Israel announced bids for 307 new apartments in Har Homa, part of a ring of Jewish neighbourhoods around east Jerusalem where about 180,000 Israelis live. Palestinians, and Palestinians are demanding that Israel halt the project.
The Palestinians claim the eastern sector of the city as capital of a future state. Israel, which annexed east Jerusalem after capturing it along with the West Bank in 1967, does not accept demands to limit its construction there.
“This (building) kills the credibility of the peace process,” Palestinian negotiator Saeb Erekat said.
A spokesman said joint committees would begin discussing the main issues, “but there is a need to freeze the settlement activities in order to create the appropriate atmosphere to bring progress in the peace process.” He said Abbas will ask Olmert for “a clear cessation of settlement activities”.
The main issues – final borders between Israel and a future Palestinian, the fate of Palestinian refugees and the status of Jerusalem and its holy sites - have blocked years of peace efforts.
“We attach great importance to our dialogue with the Palestinian leadership and we understand that the process is challenging,” an Israeli spokesman said. “Israel is committed to doing everything we can to make this process work.”
Efforts to bring Israel and the Palestinians back to the negotiating table improved after Islamic Hamas militants seized control of the Gaza Strip in June.
Mr Abbas, a moderate, expelled Hamas from government after the takeover, freeing him to conclude a peace agreement.
Hamas, which is not party to the talks, pronounced today’s meeting a “waste of time”.
“Olmert and his government continue their daily aggressions against our people, continue to build settlements, and don’t recognise Palestinian political and national rights,” the group said.