Israeli Foreign Minister Avigdor Lieberman said on Wednesday that the best way to achieve peace was through direct talks, which Israel was willing to begin immediately, but Palestinian President Mahmoud Abbas said the Jewish state first had to meet its obligations under international agreements.
European Union (EU) Foreign Affairs and Security supremo Catherine Ashton, for her part, said the EU was waiting for the talks to begin, and the question was how best to achieve this.
Abbas, meeting visiting Brazilian President Luiz Inacio Lula da Silva, stood firm on his demand that Israel freeze all its construction in occupied territory - including East Jerusalem.
While the Palestinians had implemented their obligations under interim agreements, Israel should do the same, he told a joint news conference in Ramallah.
"The most important in these is freezing settlement activities in all the Palestinian areas, including Jerusalem," he said.
The Palestinians "insist on meeting these obligations so that we can go to indirect negotiations", he said.
He denied the demand for a total construction freeze was a precondition for starting peace talks, because, he said, it was an Israeli obligation under the 2003 "road map" peace plan, sponsored by the US, UN, EU and Russia.
After much pushing by the US, Abbas only 10 days ago had agreed to hold talks - albeit indirect ones - with Israeli Prime Minister Benjamin Netanyahu despite the absence of a full settlement freeze that includes also East Jerusalem, which Palestinians want as the capital of their future state.
But Israel then announced the construction of 1,600 homes in the East Jerusalem neighbourhood of Ramat Shlomo just as the new talks were announced and US Vice President Joe Biden was visiting, sparking a severe crisis.
Both US Secretary of State Hillary Rodham Clinton and Abbas are now demanding that Israel cancel the Ramat Shlomo construction plan.
Lieberman, addressing a news conference with Ashton in Jerusalem, said the timing of the Israeli announcement on the 1,600 homes was "wrong".
"I made that clear and Israel apologised," he said, but added, it was unreasonable to demand that Jews are forbidden to buy or build in East Jerusalem.
"In Israel everyone wants peace," he said. "There is no better way than direct negotiations. I say today we are ready to start with direct talks immediately."
Ashton said she believed it was a long-term interest of both sides for the talks to begin, "the sooner the better".
Earlier, meeting Jordanian Foreign Minister Nasser Judeh in Amman, Ashton said she hoped an upcoming meeting of representatives of the so-called Quartet - the US, Russia, the UN and the EU - would provide an opportunity "to do more and try to give support to the move to proximity talks which will be leading to formal negotiations and a solution to the issues".
The largely Palestinian-populated East Jerusalem, now dotted with Jewish neighbourhoods, has been the scene of much friction, most recently Tuesday, when Palestinians declared a "day of rage" to protest Israel's reopening of an historic synagogue in the Jewish Quarter of the Old City.
The recent events in Jerusalem drew a sharp comment from Jordanian King Abdullah II, who also met Ashton in Amman on Wednesday.
A Royal Court Statement said he urged "swift, direct and effective effort by the world community to halt the provocative Israeli measures in East Jerusalem.
"Jerusalem is a red line and Jordan cannot overlook Israel's attempts to change realities on the ground and empty the holy city of its Muslim and Christian inhabitants," the statement said.