US Middle East envoy George Mitchell sounded cautiously optimistic before meeting with Israeli President Shimon Peres on Sunday about the prospects for an agreement before October on a settlement freeze that's expected to jump start peace negotiations with the Palestinians.

Mr. Mitchell, who is scheduled to meet on Monday with Israeli Prime Minister Benjamin Netanyahu and on Tuesday with the Palestinian President Mahmoud Abbas, said that while reports in the Israeli press that a framework for peace talks is already in place are "premature," they might become accurate in the "very near future."

It's the most upbeat public assessment of the talks over the course of a four-month dialogue that has revealed serious fissures between President Obama and Mr. Netanyahu. Mitchell concurred with Peres' suggestion that renewed Israeli-Palestinian talks could occur before the end of September.

e share your sense of urgency," he said in remarks to reporters before holding talks with Peres. "It is our intention to conclude this phase of our discussions in the very near future, within the time frames that you suggest to enable us to move on to the next and really the more important phase."

A Palestinian state in two years?

A report in the center-left Israeli daily Haaretz said that in addition to a settlement freeze, the sides had reached an understanding that a Palestinian state would be declared in two years and that the talks would initially focus on agreeing to a mutual border based on the Green Line that prevailed before Israel conquered the West Bank in 1967.

The US and Israel have been negotiating for months on an Obama administration demand to halt all expansion of Jewish settlements in the West Bank, a territory claimed by the Palestinians for a future state.

Israel has resisted a freeze, saying such a step would preclude "normal" life for some 300,000 residents in the settlements. Last week it announced approval for 455 new housing units, irking the international community.

Israel's no 'sucker'

Netanyahu needed the move to shore up support from his voting base and members of his Likud party. On Thursday he told party members that while he is ready for concessions, Israel won't be a "sucker" in the talks.

Indeed, officials in Jerusalem are hoping that the US can convince Arab states to respond to a deal on construction with some steps to normalize relations with the Jewish state, though there's been no indication that Arab countries are ready to do that.

"It looks like they are headed toward a conclusion," says Yossi Alpher, the co-editor of the website Bitterlemons.org, a forum for Israeli-Palestinian opinion and analysis.

Mr. Alpher says that the sides have given no indication of how long the settlement moratorium will last and what type of building activity it will cover.

For example, Israel has resisted limits on building in East Jerusalem, a portion of the West Bank which the Jewish state annexed in 1967 as part of its capital.

Meeting in Cairo

Following a summit Sunday in Cairo between Netanyahu and Egyptian President Hosni Mubarak, the prime minister's office released a statement that the two leaders agreed that Israel, the Palestinians, Arab states, and the international community all have to do their part to advance the peace process.

"We're making progress. There are some areas where work is still required," said Mark Regev, a spokesman for Prime Minister Benjamin Netanyahu. "We want to find together with the Americans a package that will allow the peace process to restart with greater energy.... It is also important what the Arab side is going to bring to the table."

Mitchell also held a meeting Sunday with Foreign Minister Avigdor Lieberman, the controversial ultra-nationalist political leader who has repeatedly expressed deep skepticism and blunt criticism about peace talks. Mr. Lieberman has been largely sidelined as an interlocutor with the US in favor of Defense Minister Ehud Barak.

Palestinians waiting for a full settlement freeze

It has been widely reported that Mr. Obama is hoping to host a three-way meeting with Mr. Abbas and Netanyahu on the sidelines of the United Nations General Assembly at the end of the month to signal the restarting of the talks.

But the Palestinians so far have refused to rejoin peace talks until Israel consents to a full settlement freeze. Israel has only signaled that it will agree to a temporary moratorium that excludes about 3,000 apartment units at varying stages of construction. Those are conditions which would be very difficult for Abbas to accept, say analysts.

"Abbas is in a difficult position. People are saying, 'You are sitting to talk about what?' Everybody is saying the Israel is not changing," says Mohammed Dajani, a political science professor at Al Quds University. "What needs to be done is that people in the policy process should show good will. But if they continue to build settlements, and continue confiscating land, what is left to talk about?"

Peres: 'The time may be right'

Promoting successful Israeli-Palestinian peace talks is considered a central element of the Obama administration's effort to build an international coalition to confront Iran on its nuclear program.

Even the renewal of the talks would count as a diplomatic achievement for the White House. Standing by Mitchell's side less than a day after being hospitalized for fainting, Peres urged Israel and the US to move ahead.

"I think that the time may be right to do so," he said. "There are still some remaining differences but they are manageable and if we shall miss this opportunity we shall remain without a date" for peace talks.