Israel settlement activity 'not constructive': Obama

US President Barack Obama on Thursday insisted a two-state solution was still viable but condemned Israel's ongoing settlement building as unhelpful to the pursuit of peace.

The Palestinian people, he said, "deserve an end to the occupation" by Israel, but he appeared to rule out talk of a new settlement freeze at a news conference in Ramallah following talks with Palestinian president Mahmud Abbas.

Abbas told Obama there could be no talks with Israel without a freeze on settlement construction, a high-ranking official said.

"Based on the conversations I've had with president Abbas and Prime Minister Benjamin Netanyahu... the possibility continues to exist for a two-state solution," Obama said, countering claims it was no longer possible because of the pace of Israel's settlement construction.

Standing next to Abbas, Obama insisted that Washington remained "deeply committed" to realising the creation of an independent Palestinian state which would see an end to the Israeli occupation.

"The Palestinian people deserve an end to occupation and the daily indignities that come with it. Put simply, Palestinians deserve a state of their own," he said.

"We do not consider continued settlement activity to be constructive, to be appropriate, to be something that can advance the cause of peace," he said.

But while Obama was quick to identify settlement construction as unhelpful to peace efforts, he also appeared to rule out pushing for a settlement freeze.

On the question of a new freeze, Obama appeared to sidestep the issue.

If each party "is constantly negotiating about what's required to get into talks in the first place, then we're never going to get to the broader issue, which is how do you actually structure a state of Palestine," he said.

During their private meeting, Abbas told Obama that "a resumption of negotiations is not possible without an Israeli settlement freeze in the West Bank and east Jerusalem," his political adviser Nimr Hammad quoted him as saying during their two-and-a-half-hour meeting.

Direct peace talks broke off in late September 2010, just weeks after they were launched with the Palestinians refusing to continue talking while Israel builds on land they want for a future state.

Israel has said it is ready for an immediate resumption of talks, but insists it will only talk if there are no pre-conditions.

Speaking in Arabic at the news conference, Abbas said that peace needed both political courage and good faith.

"We believe that peace is necessary and definite, and that peace needs political courage... and taking steps (that show) good intentions," he said.

"Peace is not forged through violence and occupation and walls, and not by denying the rights of refugees."

Obama also condemned the firing of two rockets from the Gaza Strip into southern Israel, saying the territory's Hamas rulers were responsible for stopping it.

"We saw the continuing threat from Gaza again overnight with the rockets which targeted Sderot," he said.

"We condemn this violation of this important ceasefire that protects both Israelis and Palestinians, a violation that Hamas has a responsibility to prevent," Obama said of a deal that ended eight days of bloodshed in November.