US Middle East envoy George Mitchell on Monday appealed to Israel, the Palestinians and Arab states not to shy away from difficult or controversial steps towards peace in the region.

Amid a flurry of US diplomatic activity across the Middle East, Mitchell told Palestinian president Mahmud Abbas that Washington is doing "everything we can to achieve a comprehensive peace.

"That includes between Israelis and Palestinians, between Syrians and Israelis between Israel and Lebanon, and the normalisation of relations between Israel and all of the countries in the region," he said following the talks in Ramallah, the political capital of the occupied West Bank.

"In order to achieve that objective the president has asked that all involved take steps to make possible an early return to meaningful negotiations and a prompt resolution of those negotiations," the envoy said.

"That means that everyone must take steps, some of them difficult some of them controversial."

Mitchell said Israel must deal with "difficult issues like settlement and outposts," while the Palestinians need to "take action against incitement."

Backing up the envoy's call, the White House confirmed President Barack Obama had recently sent letters to Arab governments urging confidence-building measures to create a climate for peace negotiations.

The written appeals for conciliatory moves, reportedly made to at least seven states in the region, coincided with US officials lobbying Israel to freeze settlement activity on occupied territory.

Palestinian negotiator Saeb Erakat said the Palestinian side told Mitchell that "in order to make the future round of negotiations successful we need to have a framework that can lead to a final resolution.

"Israel has failed to fulfil any of its roadmap obligations, including a settlement freeze, the reopening of Palestinian institutions in East Jerusalem, removal of outposts, the release of Palestinian prisoners and the return to the situation as it was before September 2000."

Defence Secretary Robert Gates, for his part, reassured the Israelis that a US bid for dialogue with Iran was not open-ended and that Washington wanted to see a response within two months.

"The president is certainly anticipating or hoping for some kind of a response (from Iran) this fall, perhaps by the time of the UN General Assembly" which opens in September, Gates said at a news conference in Jerusalem with Israeli counterpart Ehud Barak.

The US administration would lobby for much tougher sanctions against Iran if Tehran rebuffed its diplomatic outreach, Gates said later in the Jordanian capital Amman.

The United States and Israel, widely considered the Middle East's sole if undeclared nuclear armed state, suspect Iran is trying to build atomic weapons under the guise of a civilian nuclear programme, a charge Tehran denies.

Obama said in May after meeting Israel's hawkish Prime Minister Benjamin Netanyahu that he would assess whether Iran was serious about nuclear talks by the end of this year.

Gates reaffirmed that Washington would continue to provide its close ally with "robust" military aid to counter what he called a "growing threat posed by rockets and missiles."

Gates later held talks with Jordan's King Abdullah II in Amman.

Mitchell, who was to meet Netanyahu on Tuesday, held talks with Egyptian President Hosni Mubarak earlier on Monday.

Egypt has been mediating unity talks between rival Palestinian groups Fatah and Hamas as well as between Israel and Hamas for a prisoner swap to try to secure the release of an Israeli soldier held in Gaza.

Mitchell's meetings in Israel have also focused on the issue of settlements on occupied Palestinian land, one of the main stumbling blocks in the peace process.

Israel's refusal to heed US demands to stop all settlement activity has seen tensions between the two allies rise to a level not seen in years.

Another top US official, national security advisor James Jones, was due to visit Israel on Tuesday for a three-day visit. The retired general is leading a high-level delegation including Dennis Ross, a senior advisor to Obama and former Clinton administration pointman on Israeli-Palestinian talks.