The number of Israeli citizens killed in Palestinian militants' attacks has plunged from more than 400 in 2002 to six last year and two so far this year, he noted, adding that Israeli settlement building has slowed because of Israel's 10-month moratorium on settlement building.

While Netanyahu has refused to extend the moratorium, the two sides could strike a compromise if the Israeli prime minister restricts building to modest growth in the areas that will probably be absorbed into Israel after an agreement is made, he argued.

Israel could also vow to prevent its army from entering areas under Palestinian control and allow the Palestinian police to patrol in most West Bank villages, he contended.

The public on both sides, and a majority of Arabs, also support a two-state solution, he said. For its part, the Obama administration is now faced with deciding what role to play in the negotiations.

Amjad Atallah, co-director of the Middle East task force at the New America Foundation, said Obama has two choices, either to play the role of facilitator or negotiator, although it has so far chosen to be the former.

Despite efforts to remain aloof, Washington is a key player and has a vested interest in ending the conflict, some analysts argued.

"The United States is the third combatant in this conflict," Atallah said, adding that Israel's occupation of Palestinian territory would be impossible without Washington's support.

The existence of the Palestinian Authority is also a function of U.S. policy and European and American largess, he said.

"For us to go into this process pretending we are just simply a facilitator and who is attempting to have the two parties air out two completely different perspectives ... and then believe that will somehow lead to a conclusion, is going to make everyone very unhappy," he said at a recent panel discussion in Washington.x The United States has in the past adopted a more take-charge approach to peace talks during other conflicts, noted Atallah, who added that he does not necessarily advocate such an approach.

During negotiations on the war in Bosnia, for example, participants were unable to come to an agreement for a number of years.

"It was only when the United States took over the process ... and actually forced through a solution that they all had to grumble and accept an agreement," he said.