George Mitchell, the top US envoy to the Middle East, said yesterday that he hoped to conclude an agreement with Israel on a possible freeze of Jewish settlements in the occupied West Bank this week to help spur the renewal of peace talks.

Mr Mitchell, who arrived in Israel on Saturday, said after a meeting with Shimon Peres, the Israeli president: “While we have not yet reached agreement on many outstanding issues, we are working hard to do so, and indeed the purpose of my visit here this week is an attempt to do so.”

However, the US emissary also cautioned that it was too early to say Israel and the United States have wrapped up details of a pact. He said: “Suggestions that we have finalised an agreement on a range of issues … are premature.”

Israel has been under unprecedented pressure for months from Washington, its closest ally, to halt all settlement activity. Although a construction moratorium in the occupied West Bank is expected to last about nine months, Israel is resisting US demands for the freeze to continue afterwards in the large settlement blocs that the country plans to keep under any future agreement with the Palestinians, Israeli media reported yesterday.

East Jerusalem, which Palestinians want as the capital of their future state and which Israel views as part of its undivided capital, is another point of dispute. Israel is holding firm on continued construction in the area while Washington calls for the country to at least refrain during the freeze period from evicting Palestinian families and demolishing Palestinian homes built without permits.

Benjamin Netanyahu, the Israeli prime minister, yesterday indicated that a compromise has still not been reached when he told reporters before the weekly cabinet meeting: “There is still work to do … progress has been made on some issues and there are certain things in which we have yet to make progress.”

He also appeared to point an accusing finger at the Palestinians by adding: “I hope that we can minimise the gaps in order to drive forward the peace process. We are not the ones placing obstacles. From our point of view, there are no delays in entering a negotiations process.”

Mr Mitchell’s visit appears to be a last-ditch effort by Washington to clinch a settlements deal with Israel and pave the way for a tripartite meeting at the UN General Assembly late next week with Mr Netanyahu, Barack Obama, the US president, and Mahmoud Abbas, the president of the western-backed Palestinian Authority.

Mr Obama is expected to announce in the coming weeks a Middle East peace plan that could begin implementation as early as October. However, according to Israeli press reports yesterday, the country’s senior officials believe a settlements compromise may not be reached in time for the event in New York and may postpone the summit until next month.

Mr Obama’s bid for a meeting also faces a hurdle from the Palestinians, who are angered by the possibility that a settlements freeze would still allow for the construction of 2,500 housing units already underway and would not include East Jerusalem.

In a sign of intensifying diplomatic efforts to kick-start the peace process, Mr Netanyahu headed to Cairo yesterday to meet Hosni Mubarak, the Egyptian president, for the second time since he took power in late March.

The two leaders, who, it is reported, speak weekly by telephone, and who met over an iftar meal yesterday, were expected to focus on regional peace initiatives, since the support of Egypt is viewed as vital to implementing the comprehensive Middle East peace plan being advanced by the Obama administration.

The pair may also talk about progress in Egyptian-mediated efforts for a prisoner exchange between Israel and Hamas. The group rules the Gaza Strip, where an Israeli soldier kidnapped three years ago is reported to be held.

The accelerated efforts to reach a settlement freeze come amid reports that western countries are pushing for peace negotiations between Israel and the Palestinians to resume as soon as next month. Haaretz, a liberal Israeli newspaper, cited unidentified Palestinian and European Union sources yesterday as saying that the establishment of a Palestinian state is planned to be officially announced within two years.

The plan, according to the report, calls for the first stage in the talks to determine the permanent borders between Israel and the West Bank. This stage will be accompanied by a public US and European declaration that the final borders will be based on those preceding the 1967 Middle East war, when Israel conquered the West Bank, the report added.

Mr Mitchell was also due meet Ehud Barak, the defence minister, and with Avigdor Lieberman, the foreign minister, late yesterday. Today, he meets Mr Netanyahu and tomorrow he will travel to the West Bank city of Ramallah to see Mr Abbas.