Mitchell has shuttled across the Middle East in an attempt to find a compromise [AFP]

US officials said they remained cautiously optimistic, but Mitchell's round of shuttle diplomacy between the two sides on Friday produced no immediate results.

Mitchell had hoped to reach a deal on a settlement freeze that would allow the two sides to meet on the sidelines of the UN General Assembly in New York next week.

The US envoy held two meetings with Binyamin Netanyahu, the Israeli prime minister, in Jerusalem, and also met Mahmoud Abbas, the Palestinian president, in Ramallah but no deal appeared to be forthcoming.

Mitchell's efforts were effectively been brought to an end, at least temporarily, by the onset of Israeli and Palestinian public holidays - the Jewish New Year and Muslim Eid al-Fitr.

'No agreement'

US and Israeli officials have remained tight-lipped over the talks, but earlier Saeb Erekat, the chief Palestinian negotiator, said that no deal had been reached.

"Mitchell's shuttle visit has ended without agreement. There is no agreement yet with the Israeli side and no middle-ground solution," he said.

Abbas has demanded a full halt to settlement expansion in the West Bank and East Jerusalem as a condition for resuming negotiations on a final peace settlement - talks that were broken off in December.

Barack Obama, the US president, has endorsed that call, urging both sides to meet the terms of a 2003 US-backed "road map" for peace.

But Netanyahu has ruled out stopping construction in East Jerusalem and wants settlements in the West Bank to be able to grow to accommodate the expanding families of current settlers.

The Reuters news agency quoted an unnamed Israeli government official as saying that Israel was prepared to go further than the six-month freeze previously suggested by Netanyahu. 

"Israel will agree to extend the freeze beyond six months - possibly nine months, but less than a year," the official was reported as saying.

The US has pushed for a year-long freeze in settlement building.

The Palestinians say that the spread of the settlements could deny them a viable state as they divide areas of the West Bank.

About 500,000 Israelis live in the West Bank and in Arab East Jerusalem, territory captured in a 1967 war, alongside about three million Palestinians.

Meeting 'still possible'

The meeting at the United Nations in New York could still take place, Erekat said, but added that it would be "meaningless" unless Netanyahu changed his position on settlement expansion.

A further key issue stalling the talks is Israeli reluctance to commit to a target schedule for reaching a final settlement, possibly in no more than two years, that would create a Palestinian state.

Abbas, facing a strong challenge from Hamas, which controls the Gaza Strip, has rejected suggestions that he negotiate possible temporary arrangements with Israel.

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