Prime Minister Benjamin Netanyahu warned on Sunday that Israel would respond to any unilateral Palestinian steps - particularly declarations of statehood - with one-sided steps of its own.

This was the prime minister's first response to a Palestinian initiative to ask the United Nations Security Council to endorse a Palestinian state, seen as an appeal for international backing.

In his address to the Saban Forum in Jerusalem, Netanyahu said that Israel wants negotiations toward a full peace accord. There is no substitute for negotiations, he said, and unilateral action would only unravel earlier agreements between Israel and the Palestinians.

"There is no substitute for negotiations between Israel and the Palestinian Authority and any unilateral path will only unravel the framework of agreements between us and will only bring unilateral steps from Israel's side," Netanyahu said.

The prime minister emphasized that negotiations must begin at once, in good faith between the two sides. There was no point in wasting time, he said.

The negotiations would not be easy, he said, and would have to cover sensitive issues. Israeli leaders must be brave of heart to see this go forth, he said, but so too must the Palestinians.

The negotiations must cover the security situation, he added, citing three central challenges that must be addressed in order to achieve peace.

First of all, he said, Iran must not be allowed to develop nuclear weapons.

Second of all, Israel must find a way to fight the threat of rockets from militants in the Gaza Strip.

And third, he said, Israel's right to self-defense must be accepted.

If Israel and the Palestinians just began peace negotiations, said Netanyahu, "we can surprise the world."

The prime minister referred to the future of Iran's contentious nuclear program as a turning point in the 21th century, adding that extremism was on the rise in the Middle East.

Iran will try to foil peace between Israel and its neighbors, Netanyahu warned. The international community must thus understand the underlying dangers of a nuclear Iran.

The prime minister added that before peace could be achieved, the Palestinian rocket capability must be neutralized.

Netanyahu thanked President Barack Obama for his administration's continued support of Israel's security. Former U.S. president Bill Clinton told the same forum just before Netanyahu's speech that Israel must give Obama a chance, adding that Middle East peace could be solved during the American leader's term.