The Israeli prime minister's comments came as George Mitchell, the US envoy to the region, visited in an attempt to restart negotiations between the Palestinians and Israel, which were suspended a year ago.

'Interesting ideas'

Netanyahu said after meeting Mitchell on Sunday that he had "heard some interesting ideas for renewing the [peace] process".

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"I also expressed my hope that these new ideas will allow for the renewal of the process," he said.

"Certainly if the Palestinians express a similar readiness, then we will find ourselves in a diplomatic process."

But Nabil Abu Rdeneh, an aide to Mahmoud Abbas, the Palestinian president, said that Netanyahu's statement about retaining areas of the West Bank undermined the US efforts.

"This is an unacceptable act that destroys all the efforts being exerted by senator Mitchell in order to bring the parties back to the negotiating table," The Associated Press news agency quoted him as saying.

Netanyahu has also said this week that Israeli security forces would have to maintain a presence inside any future Palestinian state.

He said on Thursday that Israel would need to operate along the West Bank's eastern border to prevent weapons being smuggled to Palestinian fighters.

Statehood hopes

Netanyahu's remarks are unlikely to be compatible with the Palestinians' demand for a sovereign state within the two entities pre-1967 borders.

Palestinians want to create an independent state in the West Bank, Gaza Strip and east Jerusalem with full control of its own borders.

Since Netanyahu took office last year, he has been hesitant to refer to the concept of a Palestinian state and has not outlined how much, if any, of the occupied West Bank he would be willing to give over to Palestinian control.

Palestinian leaders have said they will not resume peace talks until Israel halts all construction of illegal settlements in the West Bank and east Jerusalem.

Netanyahu has called a limited and temporary halt to the building of new housing units in the West Bank, but the Palestinians have dismissed the move as not going far enough.