US President Barack Obama has drawn a line on Israeli settlement expansion before he meets with Palestinian president Mahmud Abbas as part of his urgent quest to revive peace talks.

Secretary of State Hillary Clinton said Obama made it clear, when Israeli Prime Minister Benjamin Netanyahu visited here last week, that he wants "no natural growth exceptions" to his call for a settlement freeze.

The remarks -- which a former US official called "almost unprecedented" in toughness toward ally Israel -- amounted to another challenge to Netanyahu, who has already balked at Obama's call for a Palestinian state.

Israel Thursday played down the blunt US call.

"In essence, there is nothing new in the comments by the secretary of state," a senior official told AFP referring to Clinton's statements.

"Hillary Clinton did nothing but again express the differences that appeared during May 18 meeting in Washington between President Barack Obama and Prime Minister Benjamin Netanyahu," the official said on condition of anonymity.

Netanyahu told his cabinet Sunday he did not intend to build new settlements but that "it makes no sense to ask us not to answer to the needs of natural growth and to stop all construction," a senior official said.

Speaking during a visit by Foreign Minister Ahmed Abul Gheit of Egypt, a key mediator in the peace talks, Clinton said the "president was very clear" about settlements when he welcomed Netanyahu to the White House on May 18.

"He wants to see a stop to settlements. Not some settlements, not outposts, not natural growth exceptions," Clinton told reporters.

Abul Gheit, standing next to Clinton, said "we feel encouraged on the insistence and the determination" of the Obama administration's push for peace and a Palestinian state.

Egypt's top diplomat warned that negotiations were needed in order to create a "Palestinian state as soon as possible" or the world would suffer.

Both Clinton and Abul Gheit were due to meet here Wednesday with Abbas, who arrived in Washington late Tuesday ahead of his first official meeting with Obama.

The US-backed Palestinian Authority has ruled out restarting peace talks with Israel unless it removes all roadblocks and freezes settlement activity in the occupied West Bank, according to top negotiator Ahmed Qorei.

He said Abbas would present the conditions during the White House talks with Obama Thursday.

Abbas is in Washington with his prime minister Salam Fayyad, who was sworn in last week at the head of a new Palestinian government that excludes the Islamist movement Hamas after the rival factions failed to agree on a unity deal.

The two factions have been at loggerheads since Hamas forces ousted forces loyal to Abbas from the Gaza Strip in June 2007. Since then, the Iranian-backed Hamas has run the tiny coastal enclave and the secular Abbas has been in charge of the West Bank.

Israeli media meanwhile said Tuesday that Netanyahu is willing to tear down settlement outposts -- those settlements Israel considers illegal -- in the occupied West Bank in return for US backing of its stance on arch-foe Iran.

Clinton's spokesman Ian Kelly told reporters earlier that Middle East envoy George Mitchell held talks Tuesday with Israeli officials in London in a follow-up to Netanyahu's visit to the White House.

He did not confirm reports that the talks touched on the perceived threat from Iran or Obama's call for a freeze on settlements.

Aaron David Miller, who served in both past Democratic and Republican administrations, told AFP that Clinton's remarks were "almost unprecedented" and amount to "something of a radical break with past administrations."

Only former secretary of state James Baker and president George H.W. Bush, he said, have taken as hard a line on settlements, but that came much later, not in the first few months of a new administration.

"These (Obama) guys are determined either to change Netanyahu's behavior on the settlements issue or ... bring about a change in the Israeli government," he speculated.

Netanyahu runs political risks, he said, if he damages Israel's ties with its main ally Washington at a time when he is warning about the "existential" threat from Iran.

But, Miller said, Obama also risks a backlash from US supporters of Israel if he appears unfair to the Israelis or mismanages the showdown with Netanyahu.

Obama, he suggested, may be trying to line up some Arab states to recognize Israel in return for the settlement freeze.