Secretary of State Hillary Rodham Clinton speaks at the Fifth Annual Gala of the American Task Force on Palestine in Washington, 20 Oct 2010

U.S. Secretary of State Hillary Clinton reaffirmed the U.S. commitment to a two-state solution and comprehensive peace in the Middle East.

Secretary of State Hillary Clinton says the path to security and dignity for Palestinians and Israelis lies in negotiations that result in two states, living side by side in peace.

"We remain convinced that if they persevere with negotiations, the parties can agree on an outcome that ends the conflict; reconciles the Palestinian goal of an independent and viable state based on the 1967 lines, with agreed swaps and Israel's goal of a Jewish state with secure and recognized borders that reflect subsequent developments and meet Israel's security requirements," Clinton said.

Secretary Clinton spoke Wednesday to the American Task Force on Palestine, a non-profit group advocating a peaceful settlement of the Palestinian-Israeli conflict.

She also reaffirmed the Obama administration's position that settlement construction in the occupied territories should be frozen. The Palestinians fear continuing Jewish settlement will deny them a viable and contiguous state.

"Our position on settlements is well-known and has not changed. And our determination to encourage the parties to continue talking has not wavered," Clinton said.

The Palestinians have said they will not return to negotiations until Israel suspends settlement activity in territories it seized in 1967.

Clinton said while there is no magic formula to break the impasse over settlements, the United States is working hard to create conditions for negotiations to continue.

Arab League Ambassador in Washington, Hussain Hassouna, said he is concerned about what Clinton did not say.

"I would have loved her to speak more about the obstacles to peace now, which we all recognize are in the continuation of the settlements and the position of the Israeli government, which makes direct negotiations impossible," Hassouna said. "We do not only need nice words, I think we need deeds and achievements."

Israel's embassy did not respond to a request for comment. But American Jewish Committee Director of Communications Ben Cohen says settlements are just one issue in the negotiations. He blames the Palestinian Authority for not taking Israel's self-declared moratorium on settlement building seriously. That moratorium expired last month.

"It is very clear that the U.S. government does not regard Jewish settlements in the West Bank as a positive contributor to this process, but that does not necessarily mean that the Palestinian Authority approach is the right one," Cohen said. "And it is very clear that Prime Minister Netanyahu has sent numerous signals that he is prepared under certain conditions to extend that moratorium."

Cohen welcomes Secretary Clinton's reference to 1967 borders with agreed upon swaps and defining Israel as a Jewish state, but he says the Palestinian Authority should have the political will to make these terms work.

Clinton said U.S. special envoy to the Middle East George Mitchell will soon return to the region for further consultations.