Mr Sarkozy said he wanted love, not war, around the Mediterranean
French President Nicolas Sarkozy has launched a new international body with 43 member nations aimed at ending conflict in the Middle East.
The Union for the Mediterranean will tackle issues such as regional unrest, immigration to pollution.
At the summit's opening in Paris, Mr Sarkozy said its aim was to ensure the region's people could love each other instead of making war.
Israeli and Palestinian leaders earlier expressed optimism about peace talks.
Israeli Prime Minister Ehud Olmert said Israel and the Palestinians have never been as close to a peace deal as they are now.
He was speaking after talks with Palestinian leader Mahmoud Abbas, who said both sides were serious and wanted to achieve peace.
Transform the region
Mr Sarkozy urged Middle Eastern countries involved in long-running conflicts to end the deadly spiral of war and violence, as European nations had done by making peace which each other during the 20th Century.
Mr Sarkozy says his presidency of the EU is committed to progress on Middle East peace
He said the grouping "will build peace in the Mediterranean together, like yesterday we built peace in Europe".
Comprising 27 EU members with states from north Africa, the Balkans, Israel and the Arab world, the union's membership will include 756m people from Western Europe to the Jordanian desert.
Welcoming the presence of Arab states alongside Israel, Greece alongside Turkey and Morocco alongside Algeria, Mr Sarkozy said the group would not be "north against south, not Europe against the rest... but united".
He outlined the group's determination to focus on concrete projects focusing on the environment, immigration, security cooperation, transport and education.
The French president was clearly buoyed by the presence in Paris of so many Mediterranean rim leaders and said the union would be based on concrete projects, says BBC world affairs correspondent Nick Childs.
Mr Sarkozy is one of those politicians who is full of surprises because he is always campaigning
But critics have dismissed the new union as lacking substance, and diplomats say there are continuing disagreements over key issues such as how to address the Middle East peace process and a possible role for the Arab League.
The only leader boycotting the Paris meeting was Libyan President Muammar Gaddafi, who has described the union as a new form of colonialism.
Mr Sarkozy played down the absence of Moroccan King Mohammed VI, saying he had sent his brother as a senior representative.
He also dismissed suggestions the Syrian president had snubbed Israel by walking out of a speech by Ehud Olmert.
Meanwhile, Palestinian leader Mahmoud Abbas said both he and Mr Olmert were serious and wanted peace.
Israeli PM Ehud Olmert said his country had never been so close to reaching an agreement with the Palestinians as now.
He added that he would like direct talks with Syria, but warned they must not hinder talks with the Palestinians.
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