President Bush has held talks with Mahmoud Abbas, the president of the Palestinian Authority, in the West Bank town of Ramallah.
He predicted that there would be a Middle East peace treaty within a year, giving the Palestinians their own state.
Mr Bush promised to put pressure on Israeli Prime Minister Ehud Olmert and Mr Abbas to come together to make tough choices.
A BBC correspondent says many Palestinians feel the trip is less about substance and more about show.
Palestinian security forces used tear gas and batons to break up a small demonstration against Mr Bush's visit.
Mr Bush was driven to Ramallah, but better weather allowed him to fly to Bethlehem, where he visited the Church of the Nativity.