Israelis and Palestinians will be invited Friday to begin direct peace talks in two weeks in Washington, a diplomatic source said Thursday night.

Both sides were expected to attend the talks, which would begin Sept. 2, the source said, speaking on condition of anonymity.

Envoys from the so-called Quartet of powers -- the United States, the European Union, Russia and the United Nations -- agreed to the details Thursday, the source said, adding that President Obama would be present at the talks.

The White House declined to comment Thursday.

Secretary of State Hillary Rodham Clinton spoke Thursday by telephone with the Quartet representative, former British prime minister Tony Blair, as well as Jordanian Foreign Minister Nasser Judeh. She also spoke to Egyptian President Hosni Mubarak, spokesman P.J. Crowley noted.

The Middle East peace process resumed in May, after a hiatus of 19 months, but it stalled again over the terms of moving from indirect talks, mediated by U.S. envoy George Mitchell, to direct negotiations.

Israel insists it is ready for direct talks, provided there are no preconditions. The Palestinians are ready provided there is a clear agenda. Israel says an agenda means preconditions.

Resolving the snag over terms is crucial, diplomats say.

The Quartet has been discussing a draft statement saying that the direct talks are intended to conclude a treaty in one year -- a change from a June proposal that said peace talks would be expected to conclude in 24 months. The Palestinian Authority government intends to have established all the attributes of statehood by mid-2011.

Diplomats say the idea that a unilateral declaration of statehood could win support if talks do not start or if they collapse in the next 12 months is gaining interest.

Obama wants face-to-face talks started well before Sept. 26, when Israel's 10-month moratorium on Jewish settlement-building in the occupied West Bank is due to end. A full-scale return to settlement construction could sink the talks for good.

Quartet statements from Moscow, Trieste and New York this year called for a halt to settlement building.

The draft, however, does not explicitly repeat that demand, which would be rejected by right-wingers in Israeli Prime Minister Binyamin Netanyahu's center-right coalition.

It simply says that direct, bilateral negotiations that resolve all final status issues should "lead to a settlement, negotiated between the parties, that ends the occupation . . . and results in" a state at peace with Israel.

Success will require the sustained support of Arab states, it adds.

Netanyahu may benefit from a move to direct talks, countering the notion abroad that he is not a genuine peace-seeker.

If accepted by Netanyahu as the basis for talks, the Quartet invitation could give Palestinian President Mahmoud Abbas the backing he needs.

Few Palestinians or Israelis believe that direct talks would lead to a peace treaty soon, or that one would be quickly implemented if a pact were ever reached.

In Israel's coalition, attention is focused on the Sept. 26 settlement moratorium deadline, with a majority of Netanyahu's inner cabinet opposed to extending the settlement freeze but a minority seeking some compromise that Abbas could swallow. One idea is to allow building in big, established settlements that Israel expects to keep in a peace deal but not in those it would hand over in a land swap with the Palestinians.