srael expects U.S. mediated peace talks with the Palestinians to resume sometime next month, Deputy Foreign Minister Danny Ayalon said on Wednesday.

Ayalon's pronouncement was the latest in a series of statements by Israeli officials expressing optimism at the restart of talks stalled since December 2008.

When asked in an interview on Israel Radio when the talks might resume, Ayalon said: "There is no final date yet, but I estimate that it is a matter of some two weeks."

Ayalon was speaking from Washington where he held talks with U.S. officials.

On Tuesday, Israeli Prime Minister Benjamin Netanyahu told his right-wing Likud faction he hoped talks with Palestinians, that U.S. President Barack Obama's envoy George Mitchell has sought to convene, may resume as soon as next week.

Netanyahu said he would meet Egyptian President Hosni Mubarak in Egypt next Monday to help facilitate the re-start of talks. Egypt has been a key player in the negotiations.

Mitchell has been pushing the sides to renew negotiations stalled since the Gaza war in December 2008, on an indirect basis or as so-called "proximity" talks.

Obama's envoy held three days of talks with Israeli and Palestinian leaders in the region last week and is expected to return next week.

Palestinian President Mahmoud Abbas has insisted Israel freeze Jewish settlement building before the talks resume. He has rejected a temporary hiatus in construction ordered by Netanyahu last year as insufficient.

But Palestinian sources said on Sunday Mitchell had offered them in exchange for holding indirect contacts with Israel an unwritten commitment to assign blame publicly to any party that took action compromising the negotiations.

The formula appeared to envisage a situation in which Israel could quietly delay implementing housing projects in and around East Jerusalem -- construction which Washington has said could jeopardise peacemaking -- without declaring a freeze.

Jerusalem is a key issue in the conflict. Israel sees the city as its indivisible capital. It captured Arab East Jerusalem in the 1967 Middle East war and annexed it in a move that is not recognised internationally. Palestinians want it as capital of a future state.