The Israeli cabinet said it would only resume withdrawals if the Palestinians renounced plans to declare an independent state in May, stopped calling for the release of prisoners "with blood on their hands" and halted all "incitements to violence".

But State Department spokesman James Rubin said Israel was obliged to make the withdrawals under the US-brokered Wye River peace accord.

"(The accord) should be implemented as signed," he said.

"We do not think it is appropriate to add new conditions."

The BBC's Jim Muir: "Peace process in deadlock once more"

While putting pressure on Israel, he also condemned an attack by Palestinians against an Israeli soldier shown widely on Israeli television, an incident which sparked the latest impasse.

Palestinians have accused Israel's Prime Minister Binyamin Netanyahu of looking for excuses to derail the peace process.

Funeral: Sparked violence

Chief Palestinian negotiator Saeb Erekat said the new terms were ''completely unacceptable".

But Israel denied it was imposing new conditions. Government spokesman David Bar-Ilan said the Palestinians had to live up to commitments before Israeli would resume its withdrawal.

He described recent violence in Ramallah and plans to declare an indepenent state in May 1999 as "violations of the agreement".

US official Alan Miller: "Not appropriate to add new or additional conditions"

The US warning comes nine days before a visit by President Bill Clinton to solidify the agreement and just days after Mr Netanyahu told the BBC that the Palestinians had largely complied with the agreement.

Under the land-for-security deal, Israeli troops are to withdraw from 13% of the West Bank in exchange for tougher measures against Palestinian militants.

Continuing unrest

Meanwhile continuing unrest is being reported in East Jerusalem following the murder of a Palestinian by a suspected Jewish extremist.

Israeli spokesman David Bar-Ilan: "The Palestinians have to discharge their obligations"

Wednesday's violence in Ramallah came after a group of Palestinians, protesting against the continuing detention of prisoners, stoned an Israeli car.

The driver fled the moving car, while a soldier was dragged out and struck repeatedly on the head with rocks before the vehicle was set alight.

The Israeli cabinet watched the incident before they announced a halt to withdrawals.