Prime Minister Benjamin Netanuahu on Monday welcomed the Palestinians' approval of indirect peace negotiations mediated by the U.S., but reiterated that any permanent settlement would require recognition of Israel as a Jewish state and a long-term guarantee of Israel's security.

The United States announced earlier Monday that Israel and the Palestinians have formally agreed to indirect peace negotiations brokered by its special envoy to the Middle East, George Mitchell.

Mitchell, who is visiting the region along with U.S. Vice President Joe Biden, said in a statement that he was "pleased" the two sides had accepted the proposal that will see him shuttle between Israel and the Palestinian territories over the next several weeks.

"We've begun to discuss the structure and scope of these talks and I will return to the region next week to continue our discussions," Mitchell said. "As we've said many times, we hope that these will lead to direct negotiations as soon as possible.

In his statement, Mitchell appealed to the two sides to be careful and void any actions that might jeopardize the upcoming talks.

"We also again encourage the parties, and all concerned, to refrain from any statements or actions which may inflame tensions or prejudice the outcome of these talks," he said.Defense Minister Ehud Barak said earlier Monday that he would rather negotiate with the Palestinians face to face than hold talks via a U.S. mediator.

"We would prefer direct negotiations with the Palestinians but in the current climate it was hard enough to achieve indirect talks, Barak said.

But the Labor party leader vowed that the so-called 'proximity' talks would continue until direct talks became possible. "Proximity talks won't stop until we have found a way to direct dialogue between us and the Palestinians, in which every issue can be laid on the table," he said.

Also Monday, Chief Palestinian negotiator Saeb Erekat said that
the indirect talks between Israel and the Palestinians would be a last chance to keep the Middle East peace process alive.

"The relationship has deteriorated to this stage where the U.S. is trying to save this peace process with the last attempt - by the way, mark my words - this will be the last attempt in order to see if it can be a tool to make decisions between Palestinians and Israelis," he told Army Radio.

Mitchell met with Palestinian President Mahmoud Abbas on Monday afternoon following two days of talks with Prime Minister Benjamin Netanyahu on restarting statehood negotiations.

Both sides had agreed in principle to the U.S. proposal for indirect contacts to revive talks suspended since December 2008, in a boost to U.S. President Barack Obama's difficult quest to end decades of conflict.

The Palestine Liberation Organization on Sunday endorsed the indirect talks, following Arab League backing last week for four months of negotiations which the Palestinians say should focus on security and borders of a future state.

Abbas had demanded a complete halt to Israeli settlement building as a condition for resuming talks and has rejected as insufficient a limited freeze Netanyahu ordered in November under U.S. pressure.

But the PLO and Arab League decisions gave the Western-backed leader political support for re-engaging with Israel without a total settlement moratorium. Netanyahu has agreed to indirect talks, saying he hoped they would lead to face-to-face negotiations.

Erekat said he hoped Abbas and Netanyahu would take the lead in the coming talks and reiterated the Palestinian outline for a peace deal - a state in the West Bank and Gaza Strip along the lines in place before Israel captured the two territories in the 1967 Six-Day War, "with agreed swaps".

Israel's previous prime minister, Ehud Olmert, had pursued a peace agreement under which land inside Israel would be transferred to a Palestinian state in exchange for major settlement blocs in the West Bank.

Netanyahu has not endorsed the concept.

Mitchell, who has been trying to broker a resumption of peace talks for a year, met Netanyahu in Jerusalem for more than two hours on Sunday and held further talks with him on Monday.

Many observers and politicians doubt that the indirect talks, in which Mitchell is widely expected to shuttle, at least initially, between Jerusalem and the West Bank city of Ramallah, can succeed where years of negotiations have failed.

Abbas faces a continuing challenge from the Hamas Islamist movement, which has controlled the Gaza Strip for three years and opposes the U.S.-backed peace efforts.

Netanyahu, who has spelled out his vision of a Palestinian state with limited powers of sovereignty, heads a coalition government that includes political allies of settlers in the West Bank.