US Secretary of State Condoleezza Rice has told an American Jewish group that young Palestinians are losing hope for a peace agreement with Israel.

Her comments came during a sobering speech on Tuesday evening to the American Jewish Committee at their 102nd annual meeting in Washington.

Rice is set to leave early on Thursday for more Middle East peace talks with Arab and Israeli leaders, after a meeting in London designed to raise more economic support for the Palestinians.

She called on Israel to make "difficult decisions" to provide the Palestinians with the dignity of statehood.