Rice is on short visit to the Middle East in preparation for a US-led peace conference between Israelis and Palestinians.
Rice said her trip will build momentum for the peace conference, expected to be held in mid-November.
She said "critical issues" would be tackled at the talks, called by George Bush, the US president, after Hamas took control of the Gaza Strip in June.
"We can't simply continue to say we want a two-state solution, we have got to start to move towards one," she said.
"This international meeting is also going to be doing exactly that. This is not a matter just to declare that we all want to see a two-state solution."
But there are disagreements between Israelis and Palestinians over what to expect from the talks.
Ehud Olmert, the Israeli prime minister, is pushing for a softer joint declaration rather than a binding deal to emerge at the conference.
Mahmoud Abbas, the Palestinian president who is under pressure from his Fatah movement not to attend the meeting, wants a firmer "framework agreement" on core issues of borders, Jerusalem's status and refugees.
Israel also has misgivings about dealing with Abbas, whose mandate has effectively been limited to the occupied West Bank since Hamas took over Gaza.
Despite the West Bank-Gaza schism, most Palestinians demand a single state including both territories, captured by Israel in a 1967 war.