Israeli Prime Minister Ariel Sharon has vowed to press ahead with Israel's controversial West Bank security fence.
Sharon said Israel's security would not be compromised
In a speech to the Israeli press, Mr Sharon said the barrier was "essential to the security of the state".
Earlier, a top Israeli official said Israel was about to back some new West Bank settlements, in violation of the US-backed Middle East peace plan.
The US has already said it was cutting its loan guarantee package to Israel in response to its settlement activity.
However, Mr Sharon admitted that Israel would be forced to give up some occupied Palestinian territories in accordance with the peace plan, known as the roadmap.
"I spoke in the past about the need for painful concessions. It is clear that in the future we will not be in all the places we are now," he told Israeli editors in Tel Aviv.
Experts say Mr Sharon's comments appeared to reinforce recent reports in the Israeli media that Israel was prepared to withdraw from some isolated Jewish settlements to extricate itself from a Palestinian uprising, the intifada.
Mr Sharon's speech comes as senior Israeli and Palestinian officials, including Mr Sharon's son Omri - were about to hold two-day informal talks to discuss various peace initiatives in London.
The roadmap requires Israel to remove dozens of unauthorised outposts established in the West Bank since 2001, and also to freeze construction work at existing settlements.
'Limit to patience'
Mr Sharon again repeated his warning of last week that his government may act unilaterally if the Palestinians fail to negotiate the territorial issue with Israel.
The Israelis say it is a security fence to stop suicide bombers
"They don't have an unlimited amount of time. While I'm against setting artificial time frames, at the
end of the time, there is a limit to our patience," he said.
"The Palestinians should have understood by now that what they haven't gotten today they won't be given tomorrow," Mr Sharon added, refusing to give any further details.
Earlier on Thursday, Israeli Deputy Defence Minister Zeev Boim said that the government was in the final stages of approving new settlements in the West Bank.
"Illegal settlement outposts were created over the past three years and the procedure engaged for their legalisation are about to be completed," Mr Boim told the Israeli army radio.
His statement has brought immediate protests from the Palestinians.
A Palestinian cabinet minister, Saeb Erekat, said the moves undermined the present peace process, urging Washington to halt the measures.
US loan cut
Mr Sharon has been under increasing pressure from the United States to freeze settlement activity and halt the building of the security barrier.
During last week's visit to London, President George W Bush delivered an unusually sharp message about the construction of settlements and "the placement of walls and fences" that prejudice final negotiations.
On Wednesday, the US said it was cutting nearly $290m from a loan guarantee package to Israel in response to Israel's actions.
The money comes from a $9bn package of loan guarantees and does not affect Washington's direct aid for Israel.
The US move means Israel will not be able to raise so much money in loans from foreign banks.