By KARIN LAUB

The Associated Press

RAMALLAH, West Bank — President Barack Obama's special Mideast envoy was unable Friday to bridge wide gaps between Israelis and Palestinians on the terms of renewing peace talks, the chief Palestinian negotiator said.

U.S. officials said mediation efforts would continue, however. And the U.S. envoy, George Mitchell, held a second meeting with Israeli Prime Minister Benjamin Netanyahu on Friday before the onset of the Jewish New Year.

Still, the persistent differences raised doubt about Obama's plans to revive Mideast peace efforts, including the possibility of holding a trilateral meeting with the Israeli and Palestinian leaders next week in New York, on the sidelines of the U.N. General Assembly.

The key disputes are over Israeli settlement expansion and whether peace talks should begin where they left off.

Mitchell met repeatedly with Netanyahu and Palestinian President Mahmound Abbas this week to try to pave the way for resuming negotiations, which broke off in late 2008.

Israel has balked at a U.S. demand that it freeze settlement construction in the West Bank and east Jerusalem, war-won territory the Palestinians claim for their state. Under a U.S.-sponsored peace plan, Israel is required to freeze all settlement building and the Palestinians are required to rein in militant violence.

Instead, Netanyahu wants to continue the construction of about 3,000 housing units, while offering to curtail other building for a period of several months. Nearly half a million Israelis have moved to the West Bank and east Jerusalem since Israel captured the territories in the 1967 Mideast War, and Palestinians fear the growing settlements will make a viable state impossible.

Abbas told Mitchell on Friday that he will not resume talks without a complete freeze, according to Palestinian negotiator Saeb Erekat.

"We once again reiterated that there are nomiddle ground solutions for settlements," Erekat told reporters. "A settlement freeze is a settlement freeze."

The Palestinians also insist that negotiations resume on the same terms as previous rounds, led by Netanyahu's predecessor, Ehud Olmert. The so-called core issues included a partition of Jerusalem, borders between Israel and a Palestinian state and the fate of millions of Palestinian refugees and their descendants. Netanyahu has said the future of Jerusalem is off-limits in talks.

Erekat said Mitchell would return to New York after his meeting with Abbas, instead of holding another round of talks with Netanyahu. However, Mitchell returned to Jerusalem for another meeting with Netanyahu on Friday afternoon, according to an announcement by the prime minister's office.

Kurt Hoyer, a U.S. Embassy spokesman in Tel Aviv, would not comment on the content of Mitchell's mediation, but said the envoy and his aides have been cautiously optimistic.

Hoyer said mediation would continue. "We realize that this is a long process, and we're not approaching it with a certain deadline in mind," he said.

Both Netanyahu and Abbas plan to attend the General Assembly.

Abbas is conflicted about whether to meet with Netanyahu in New York, as a courtesy to Obama, said senior Palestinian officials who spoke on condition of anonymity because of the private nature of the deliberations.

The officials said Abbas was under pressure from the U.S. and Egypt to agree to a meeting with Netanyahu, despite the deep differences. However, senior aides urged Abbas not to meet Netanyahu without having set the terms for negotiations, arguing such a meeting would be seen as a sign of Palestinian weakness.

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September 18, 2009 07:56 AM EDT

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