Distracted by the crucial debate over Afghanistan, many Americans may have missed a pivotal event in the Israeli-Palestinian peace process. On Nov. 25, Israel's government announced a 10-month construction freeze in Judea and Samaria—the areas generally known as the West Bank. Though some projects already begun will be completed and essential public buildings like medical clinics and schools will be approved, no new housing permits will be issued.

"We hope that this decision will help launch meaningful peace negotiations," declared Israeli Prime Minister Benjamin Netanyahu "and finally end the conflict between the Palestinians and Israel." The Obama administration praised the decision and recognized its significance. Special Envoy George Mitchell hailed the decision as "substantial," and Secretary of State Hillary Clinton called it "unprecedented."

By contrast, Palestinian leaders rejected Israel's gesture as grossly inefficient. Without an indefinite cessation of all Jewish building in the West Bank and Jerusalem, they say, peace talks cannot resume.

What Mr. Mitchell and Mrs. Clinton understand, but what the Palestinians miss, is that Mr. Netanyahu has shown more flexibility on this issue than any previous head of his Likud Party, which is staunchly pro-settlement. Indeed, he has gone further than any prime minister in limiting a right that many Israelis consider incontestable and a vital component of their national security.

Twice—in 1948 and 1967—the West Bank served as the staging ground for large-scale attacks against Israel. While defending itself, Israel captured the territory and reunited with its ancestral homeland: Haifa is not in the Bible, but Bethlehem, Hebron, and Jericho decidedly are. Hundreds of thousands of Israelis rushed to resettle their tribal land.

These communities widened Israel's borders, which at points are a mere eight miles wide. American policy makers recognized Israel's need for defensible borders and, in November 1967, they supported U.N. Resolution 242, which called for withdrawals from "territories" captured in the war, but not from "all the territories" or even "the territories."

All successive Israeli governments supported the settlements. Only with the signing of the 1993 Oslo Accords did then-Prime Minister Yitzhak Rabin agree to restrain construction in outlying communities that he considered unnecessary for Israel's defense. But the settlements continued to expand. Meanwhile the peace process progressed. The Palestinians never made a construction freeze in Jerusalem and the settlements a precondition for talks—until earlier this year.

Mr. Netanyahu initially responded that Jews, like all people, can build legally in Jerusalem, and that it's unreasonable to disallow settlers from building even an extra room for a newborn. Still, he promised not to establish new settlements, not to appropriate additional land for existing ones, nor even to induce Israelis to move to them. Yet the Palestinians balked. The peace process was moribund, awaiting an intrepid stroke.

Mr. Netanyahu has now taken that initiative. By suspending new Israeli construction in all of the West Bank, the prime minister has done what none of his predecessors, including Rabin, ever suggested.

At home, Mr. Netanyahu's decision has been fiercely criticized, even by some members of his own party. The Knesset has considered a vote of no-confidence in his leadership. And the most recent poll shows that more Israelis oppose the freeze than support it.

The prime minister has nevertheless persisted—his coalition is among the strongest and most representative in Israel's history—but the opportunity generated by his action will not endure indefinitely. Together with the Obama administration, which has repeatedly asserted its commitment to restarting talks without preconditions and to achieving a permanent two-state solution, Israelis hope that Palestinians will once again join them in talks.

By taking risks and accomplishing the unprecedented, Mr. Netanyahu has demonstrated his commitment to peace. Now the Palestinians must match that dedication and seize this propitious moment.