Prime Minister Benjamin Netanyahu said on Thursday that progress had been made toward resolving the diplomatic crisis with the United States over the contentious plan to build more Jewish homes in East Jerusalem.

"We are trying to find the golden path between our will to advance the peace process along with the United States, and between maintaining the standard policy of all Israeli governments," said Netanyahu just before boarding a plane back to Israel early Thursday.

Netanyahu is expected to land in Israel on Thursday evening. An hour after he arrives, the forum of seven will convene where the prime minister will update the ministers on the results of his Washington visit.

Despite the prime minister's comments, Netanyahu's meeting with U.S. President Barack Obama on Tuesday has been defined as a failure. Netanyahu had delayed his departure from Washington in an effort to seek consensus after an Israeli announcement of housing construction in East Jerusalem during U.S. Vice President Joe Biden's trip to Israel earlier this month prompted a chill in bilateral relations.

Due to the controversy with Obama, Netanyahu changed his schedule on Wednesday and canceled a number of interviews and press conferences, remaining at the Israeli Embassy throughout the day and giving directives to his advisers, Yitzhak Molcho and Ron Dermer, who held talks with Mideast envoy George Mitchell and senior White House officials.

On Wednesday afternoon, while Netanyahu's and Obama's advisers were meeting, the White House released a statement condemning Israel's plan to build 20 housing units on the site of the Shepherd Hotel in East Jerusalem.

The Prime Minister's Bureau released a statement that there were no limitations on rights of ownership in Jerusalem.

A meeting between Netanyahu and Obama on Tuesday and a shorter meeting later that day had failed to bridge their serious disagreement over the continuation of the peace process and construction in East Jerusalem. Obama asked Netanyahu to clarify his positions on a letter delivered last week to the administration about Israeli gestures to the Palestinian Authority and his willingness to seriously broach the issues in the indirect talks. The president also asked Netanyahu to put these assurances in writing.

Mitchell met with Netanyahu at his Washington hotel on Wednesday in a last-ditch effort to smooth over the rift.

Netanyahu's speech to the American Israel Public Affairs Committee conference Monday and his meetings with senators and Congress members Tuesday added to the tension, since he reiterated the message that there would be no concession regarding construction in Jerusalem.

Public remarks by Netanyahu associates also riled the White House, as they indicated they had gotten the administration to back down from its original demands on Israel. Senior administration officials challenged Netanyahu about the remarks.

Netanyahu arrived at the White House on Tuesday afternoon, and held one-on-one talks with Obama for 90 minutes. The meeting ended in serious disagreement, and in an unusual move, Netanyahu, Defense Minister Ehud Barak and their advisers retired to a side room in the White House for consultations, while Obama left for his residential quarters. Some 90 minutes later, Netanyahu requested a second meeting with the president, who returned to the Oval Office for a further half-hour conversation with the prime minister.

But the second meeting between the two also ended without resolving the dispute, and they could not even reach a consensus on a joint statement.

Netanyahu and Barak left for the Israeli Embassy in Washington. Molcho and Dermer, along with Netanyahu aide Nir Chefetz and Ambassador Michael Oren, to hold talks with administration representatives. Only at 2 A.M. did these consultations end, and Netanyahu and his entourage returned to their hotel.

Obama spoke yesterday by videoconference with British Prime Minister Gordon Brown, German Chancellor Angela Merkel and French President Nicolas Sarkozy about Iran and the Middle East peace process.