Israeli leaders have taken to using a new phrase loaded with hidden meaning ahead of a proposed conference this month in Annapolis — "two states for two peoples."

The phrase is a variation on the Bush administration's repeated calls for a "two-state solution," which implies Israel's abandonment of the notion of a Greater Israel that incorporates the West Bank and the Palestinians' abandonment of any notion of destroying Israel.

The "two peoples" formulation — acquiring currency among Israeli leaders in the weeks before an international conference in Maryland — sounds innocuous enough to the untrained ear.

But the formulation is in fact a political battle cry — a blunt rejection of Arab demands that Palestinian refugees be permitted to return to Israel.

If this was not clear enough, Israeli spokesmen have spelled it out. The phrase, they said, means that Palestinian refugees could return to the planned Palestinian state but not to Israel, whose Jewish character would be overwhelmed by such an influx.

Last week, Prime Minister Ehud Olmert raised the stakes by demanding that the Palestinians formally recognize Israel as a Jewish state. This, Mr. Olmert declared, would be a precondition for bilateral negotiations to follow the Annapolis meeting.

"This has been made clear to the Palestinians and the Americans," he told the Knesset Foreign Affairs and Defense Committee last week.

Mr. Olmert's position drew expressions of puzzlement and outrage from Palestinian spokesmen, including moderates who adhere to the "two-state solution" formula.

"Why does Olmert want to poke us in the eye?" asked chief Palestinian negotiator Saeb Erekat. The Palestinian leadership, he said, has recognized Israel, but will never officially acknowledge its Jewish identity.

"It is not acceptable," he said, "for a country to link its national character to a specific religion."

In fact, many countries do — most prominently Muslim countries — but also Great Britain, where Queen Elizabeth heads the Church of England, and Greece, whose constitution declares the Eastern Orthodox Church to be the "prevailing religion."

Mr. Olmert's demand, in fact, is not religious in nature, but political. First of all, he aims to shore up his government by appeasing right-wing government ministers who are threatening to leave the coalition for fear that negotiations will force substantial Israeli concessions.

Beyond that, and beyond even the refugee issue, the demand reflects a virtually universal feeling among Israelis that the Arabs — especially the Palestinians — do not accept a Jewish state as a permanent feature in the Middle East even if some are willing to recognize it as an existing state.

Even moderate Arabs, Israelis think, look forward to the day — in a few years or a century — that Israel falls, whether through demographic changes that will erase its Jewish majority or through war.

Obliging the Palestinians to explicitly accept the Jewish character of the state, supporters of the new formulation think, would have an effect on the mind-set of the Arab world and help it come to terms with Israel as a permanent neighbor.

The issue may, in the end, be dealt with by rhetorical finessing. Mr. Erekat noted that the majority of Israelis are Jews and that in recognizing Israel, the Palestinian leadership already has "recognized the composition of the state."

While refusing to explicitly recognize Israel's religious character, he said, Palestinians would recognize Israel by whatever name it calls itself.

Noting the emergence of the Islamic Republic of Iran three decades ago in Tehran, he said, "If you call yourself the 'Jewish state of Israel,' we'll call you that."