President Bush said Thursday that Palestinian refugees should receive compensation for the loss of homes they fled or were forced to flee during the establishment of Israel and declared that there should be an end to Israel's "occupation" of lands seized in war four decades ago.

Bush made his comments after becoming the first U.S. president to visit Ramallah, the West Bank city that is the headquarters of the Palestinian Authority, in an effort to invigorate negotiations aimed at securing a peace accord before the end of his presidency.

While Bush has previously used language describing Israel's presence in the West Bank as an "occupation," his words Thursday seemed a pointed prod at the Israeli government, coming on his first trip to the country during his presidency. Palestinians have long seen Bush as a partisan of Israel, but some welcomed parts of his statement.

At the same time, Bush restated his past formulation that Israel cannot be expected to give up all the land captured during the 1967 war, parts of which now have large Israeli settlements, and that the two sides must make territorial compromises that reflect "current realities."

"There should be an end to the occupation that began in 1967," Bush told reporters, referring to the Middle East war during which Israel captured the West Bank, Gaza Strip and Golan Heights. The third territory was seized from Syria, but a senior White House official said Thursday that Bush intended to refer only to the Palestinian areas.

"The agreement must establish Palestine as a homeland for the Palestinian people, just as Israel is a homeland for the Jewish people," Bush added. "These negotiations must ensure that Israel has secure, recognized and defensible borders. And they must ensure that the state of Palestine is viable, contiguous, sovereign and independent."

Throughout his visit to Jerusalem and the West Bank, Bush has sought to address the cynicism of Israelis and Palestinians, some of whom have accused him of merely mouthing rhetoric in his final-year drive for a peace deal.

As part of this effort, Bush named Air Force Lt. Gen. William M. Fraser III, assistant to the chairman of the Joint Chiefs of Staff, to monitor the two sides' progress in meeting their obligations under the so-called road map, including Israeli promises to freeze settlement activity in the West Bank and Palestinian pledges to crack down on armed attacks against Israel. Earlier U.S. efforts to induce the two sides to implement the road map have been unsuccessful.

White House aides also said that Bush would return to the region at least once before the end of the year -- a sign, they said, of his determination to push the parties toward peace.

After a day spent with the Israelis, Bush devoted much of Thursday to the Palestinians. To reach Ramallah, Bush's motorcade crossed one of the Israeli security checkpoints that have inhibited freedom of movement and much economic activity in the West Bank.

At a news conference with Palestinian Authority President Mahmoud Abbas, Bush said he could "understand why the Palestinians are frustrated driving through checkpoints." He added, "I can also understand that until confidence is gained on both sides, why the Israelis would want there to be a sense of security."

In most respects, Bush's statement Thursday represented a careful reformulation of established positions, packaged to provide the two sides with a basis to pursue negotiations. Bush began calling as early as 2002 for some of the key things he pointed to this week, with no success toward achieving his goal of two peaceful states, Israel and Palestine.

But his language Thursday on compensation was a first for his administration; Bush's repeated statements that Israel should be a "Jewish" state have been interpreted as support of the Israeli position that there should not be a wholesale return of Palestinian refugees to their erstwhile property in Israel.

Until now Bush has resisted the Clinton administration position that the refugees should receive compensation for their losses and suffering.

To encourage Israel to leave the Gaza Strip, Bush in April 2004 gave then-Prime Minister Ariel Sharon a letter saying in effect that Palestinians should expect to reside in a Palestinian state, not return to Israel, and that Israel could expect to retain large settlement blocs in any peace deal. The letter infuriated Palestinians because it had no balancing language for them.

In his statement Thursday, Bush said that "we need to look to the establishment of a Palestinian state and new international mechanisms, including compensation, to resolve the refugee issue." Previous estimates have put the cost of compensation at $100 billion to $150 billion.

Palestinian and Israeli officials reacted cautiously to Bush's pronouncements.

"I don't think either me, nor President Bush, nor anyone else can decide for refugees whether compensation is enough. This is up to every refugee to decide and this is an individual right that should be respected," said Mustafa Barghouti, a member of the Palestinian parliament.

Walid Awad, a spokesman for Abbas's Fatah political movement, described Bush's statement on ending the occupation as "his strongest statement and it is very much welcome. . . . It was said implicitly before but not as clearly as it was now."

Mark Regev, a spokesman for Israeli Prime Minister Ehud Olmert, said the Israeli government regards Bush's statement as "a positive framework for our talks with the Palestinians." He said the president's comment on occupation reflected his previous position.

Among the many unanswered questions in the wake of Bush's visit will be what to do about Gaza, the strip of land between southern Israel and the Mediterranean that since last summer has been under the control of the armed group Hamas, which opposes Israel's right to exist.

Bush acknowledged that Hamas's control of Gaza creates "a tough situation. I don't know whether you can solve it in a year or not."

"All the Palestinians till now reject any type of agreement between Mr. Abbas and President Bush," said Fawzi Barhoum, a Gaza-based spokesman for Hamas. "Bush supports clearly and frankly the occupation as a Jewish state and as such we want nothing to do with him."