The US has stated that the additional aid will be funnelled through the PA and not Hamas, which rules the Gaza Strip but does not recognise Israel's right to exist.

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Nour Odeh, Al Jazeera's correspondent in Ramallah, said: "Palestinians want to hear her say those magic words: That the American administration under President Barack Obama would seek to end the Israeli occupation.

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Arab-Americans call for closer ties with the US

"According to senior Palestinian aides of the president, what the Palestinian Authority is looking for is American support to make sure that any Israeli government ... respects the principle of a two-state solution ... stops all settlement activity ... and takes steps on the ground that are in line with the Israeli obligations as per the road map [peace process]," she said.

Odeh said that Condoleezza Rice, the previous US secretary of state, had visited the region while Israel violated the terms of the road map and failed to urge Israel end such activity.

The road map for peace between Israel and the Palestinians was initiated by former US president George W Bush in 2002.

Its primary conditions include ending Palestinian violence, an Israeli withdrawal from the occupied Palestinian territories and a freeze of Israeli settlement building in the West Bank.

Jerusalem's municipality issued orders on Tuesday to demolish 55 homes in Ras Khamees in Shu'fat Camp, in the centre of Palestinian East Jerusalem.

The municipality said that the homes were built without licences, whereas rights groups have said that the move is a new episode in Israel's campaign of collective eviction against Palestinians.

At the Egyptian resort of Sharm el-Sheikh on Monday, Clinton pledged the additional aid to help rebuild the Gaza Strip after Israel's 22-day offensive in the territory in December.

About 1,300 Palestinians and 13 Israelis died during war, before unilateral ceasefires were declared by Israel and Palestinian factions in the Gaza Strip.

On Tuesday, Clinton urged Palestinians to "break the cycle of rejection and resistance" after meeting Israeli leaders in Jerusalem.

'Statehood inescapable'

After her meetings in Jerusalem, Clinton emphasised the need for rocket fire from the Gaza Strip into Israel to end, and defended Israel's right to respond to such attacks.

However, she has also said that a Palestinian state is the "inevitable" and "inescapable" outcome of any peace effort.

"During the conference, I emphasised President [Barack] Obama's and my commitment to working to achieve a two-state solution to the conflict between Israel and the Palestinians and our support for the Palestinian Authority," Clinton said.

The statement raises the possibility of disagreement with Benyamin Netanyahu, the Israeli prime-minister designate, who has said in the past that the Palestinians are not ready for statehood.

Netanyahu is currently attempting to assemble a ruling coalition, likely to be made up for hard-right and religious parties, after elections last month.

Though Obama has said that an Arab-Israeli peace deal will be a priority during his presidency, talks between Israeli officials and the Palestinians have stalled over violence, settlement-building and disputes over other core issues such as the future of Jerusalem and Palestinian refugees.

The PA suspended the negotiations after Israel launched its offensive on Gaza, with a stated aim of ending Palestinian rocket fire into the south of the country.