A bland joint statement issued after a marathon seven-hour meeting in New York did not address Jewish settlements, the prickly issue that has derailed the latest effort to forge peace between Israel and the Palestinians.

"The prime minister and the secretary agreed on the importance of continuing direct negotiations to achieve our goals," it said.

Direct talks broke down shortly after their launch in September when a moratorium on new settlement construction in the West Bank expired, and the Palestinians are refusing to come back to the table until it is reimposed.

US President Barack Obama and Clinton led global criticism of plans announced by Israel this week to build 1,300 new houses in occupied east Jerusalem, where the Palestinians want to place the capital of a future state.

This week's announcement prompted Palestinian president Mahmud Abbas to call on the United Nations Security Council to urgently debate Israeli settlement construction, again complicating the US task.

In New York, Clinton and Netanyahu held a two-hour, face-to-face meeting before being joined by officials to try to come up with ways to get the negotiations back on track.

"Their teams will work closely together in the coming days toward that end," their joint statement said.

In Ramallah, where crowds gathered to mark the sixth anniversary of Palestinian leader Yasser Arafat's death, Abbas said he would hold Obama to his September pledge to seek the creation of a Palestinian state within a year.

"We consider this statement to be a commitment by President Obama, not just a slogan, and we hope that next year he won't say to us 'we apologize, we can't.'"

Ahead of discussions at a New York hotel, Clinton vowed to find "a way forward" and Netanyahu said "a historic agreement" with the Palestinians was still possible.

"We also hope to broaden it to many other Arab countries... we are quite serious about doing it and we want to get on with it," Netanyahu added.

The Israeli leader has dismissed international criticism of the settlement plans as "overblown" and sought to draw a distinction between new Jewish homes in annexed Arab east Jerusalem and the occupied West Bank.

In a speech delivered at Arafat's grave site, where a new museum is being built to honor the veteran leader, Abbas vowed he would not negotiate while Israel continued to build settlements on Palestinian land.

He pledged to uphold Arafat's insistence that Palestinians would one day secure east Jerusalem as the capital of a Palestinian state and the right of return for refugees.

Abbas took umbrage at comments from Clinton on Wednesday, suggesting that "unilateral actions" by either side are unhelpful to the negotiations.

"We are thinking of going to the Security Council, and that is considered a unilateral act on our part, but when they (the Israelis) take unilateral actions like the wall, incursions, assassinations, uprooting olive trees, that isn't considered unilateral," he said.

Obama has made the deadlocked Middle East peace process a foreign policy priority, though he acknowledged this week that "enormous obstacles" stand in his way.

In Jerusalem on Wednesday, visiting US Senate Foreign Relations Committee chairman John Kerry warned that the chance to clinch Middle East peace was in danger of slipping away.

"The window of opportunity for a comprehensive peace is closing, narrowing is the best way to put it," he told reporters at a meeting with Israeli President Shimon Peres.

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