Palestinians must have a state that meets their aspirations or there will be no Middle East peace, the new US Secretary of State has said.
Rice is about to embark on her first peace mission as secretary of state
Condoleezza Rice told a meeting of her staff that Israel must yield territory and create "conditions in which a new Palestinian state could emerge".
Miss Rice is due in Jerusalem and the West Bank later this week.
The remarks coincide with a fresh outbreak of violence in Gaza where a Palestinian girl was killed by gunfire.
The Israeli army denied killing Nuran Deeb, 10, who was hit in the playground of a United Nations-run school in southern Gaza.
The Palestinian militant organisation Hamas responded to the killing by firing nine mortar shells at Jewish settlements in the Gaza Strip.
Miss Rice said a Palestinian state - recognised by Israel - was "within our grasp", but it must be viable and contiguous with enough land to function properly.
"I don't think any of us doubt that without a Palestinian state that is viable, that can meet the aspirations of the Palestinian people, there really isn't going to be a peace for either the Palestinian people or the Israelis," she said.
She also called on Arab states to stop what she described as incitement to violence.
Her remarks preceded a meeting with Israeli envoy Dov Weisglass, where a wide range of topics were discussed, including developments since the election of Palestinian Authority President Mahmoud Abbas.
Palestinian forces are under pressure to prevent all attacks
Israeli official sources earlier said Mr Weisglass would tell Miss Rice that a controversial land law, that could see thousands of hectares of Palestinian-owned land being expropriated in east Jerusalem, was being put on hold.
The mainstream Palestinian demand is for Israel to withdraw from Gaza and the West Bank including East Jerusalem, which they hope will be the capital of their future state.
Pullback on hold
Israeli troops have allowed Palestinians to cross into Egypt from the southern Gaza Strip for the first time since December.
Rafah border crossing reopened on 21 January to travellers coming the other way, but until now people leaving the Israeli-occupied strip were barred.
However, Israel put the brakes on a plan to withdraw forces from five West Bank towns following Monday's violence.
Defence Minister Shaul Mofaz told Palestinian negotiator Muhammad Dahlan that troops would leave cities one-by-one, beginning with Ramallah, rather than all five at once.
Classmates placed a plastic bouquet on Nuran's empty desk
"I cannot say that the talks collapsed, but we witnessed a freezing last night because of the latest developments," said Palestinian official Hassan Abu Libdeh.
Correspondents say Israel wants to avoid a ceasefire framework in which Hamas responds to any Palestinian bloodshed by attacking Israeli targets.
Mr Mofaz said Palestinian forces must prevent mortar fire, regardless of circumstances.
Witnesses blamed Israeli troops for the death of Nuran Deeb, but Israel said an initial investigation suggested they were not responsible.
"She suddenly screamed and fell to the ground, bleeding. The girls started to run everywhere," one witness said.
An Israeli military official said Palestinians nearby were shooting in the air to celebrate returning from the Hajj pilgrimage.
Palestinians said there were no such celebrations.
The UN said it was the fifth occasion a pupil had been hit by gunfire at its schools in Gaza. Two were killed by Israeli fire last year.
Israel captured the West Bank and the Gaza Strip - home to about four million Palestinians - during the 1967 Six Day war.