U.S. Middle East peace envoy George Mitchell will head back to the region next week after Obama administration officials vowed Wednesday to continue the push for peace despite a breakdown in direct negotiations.

Philip J. Crowley, the chief State Department spokesman, said U.S. diplomacy would continue despite Tuesday's decision to give up efforts to halt Jewish settlements, effectively ending a bid to revive direct Israeli-Palestinian peace talks. The U.S. believes direct negotiations will be necessary to resolve the Mideast conflict and would pursue bringing both sides back to the table, he said.

U.S. officials said Tuesday that they had dropped efforts to persuade Israel to stop building on land it seized during the 1967 Middle East War and later annexed. Palestinian Authority President Mahmoud Abbas said halting the construction was crucial for direct talks to resume.

U.S. officials have been hoping talks would help set borders for a proposed Palestinian state. If an agreement is reached on borders, Israel could continue building in its areas and stop construction in areas that would become part of a Palestinian state.

"I would describe this as a change in tactics, not a change in strategy," Crowley said.

Crowley said the decision, a setback for the Obama administration, marked a recognition of reality.

"We thought that this had in a sense become an end in itself rather than become a means to an end," Crowley said. "We're going to focus on the substance and try to begin to make progress on the core issues themselves, and we think that will create the kind of momentum that we need to see to get to sustained negotiations."

Crowley had no immediate details on Mitchell's itinerary, which appeared to signal a return to the indirect "shuttle" diplomacy that has long marked the Mideast peace process.

"I'm not anticipating that we would have Israelis and Palestinians in the same room at this time," he said.

Crowley said the United States continued to view further Israeli settlement activity as illegitimate. He said the impasse over settlements had also halted separate U.S. discussions of a possible security package for Israel that Washington had hoped might help Israeli Prime Minister Benjamin Netanyahu sell a settlement deal politically.

U.S. officials said Tuesday that Israeli and Palestinian negotiators would visit Washington next week for further consultations, and Crowley said these might take place in parallel with Mitchell's talks in the region.

Israeli Cabinet Secretary Zvi Hauser said Wednesday that it's "clear to all that the current course has exhausted itself" and that "ultimately, the objective of the talks is not a freeze, but effective talks leading to an agreement."