US President George W Bush has pledged $50m in direct aid for the Palestinian Authority, at a meeting with Palestinian leader Mahmoud Abbas.
Mr Bush praised Mr Abbas' rejection of violence
Mr Bush also reiterated his commitment to the roadmap for peace and the creation of a Palestinian state.
He said that Israel must not take any actions that violated its roadmap obligations and said all settlement expansion on the West Bank must stop.
Mr Abbas is the first Palestinian leader to be hosted by Mr Bush.
He said that he was more confident about the role the US administration would play in achieving peace, but that time was short.
"Time is becoming our greatest enemy, we should end this conflict before it is too late," he said.
'Moment of opportunity'
The new aid is part of a $350m package earmarked for the Palestinians.
It will go to fund housing and infrastructure projects in the Gaza Strip.
"These funds will be used to improve the quality of life of the Palestinians living in Gaza, where poverty and unemployment are very high," Mr Bush said.
The BBC's Justin Webb in Washington says that while the money is a pat on the back for Mr Abbas, the US does not want him to feel so comfortable that he fails to take actions it regards as necessary to guarantee Israeli security.
Mr Abbas had asked Congress to channel financial assistance directly to the Palestinian Authority, instead of to NGOs.
US politicians have been reluctant to do that, accusing the PA of corruption, and preferring to fund aid agencies and non-governmental organisations.
Mr Bush also urged other Arab states to help create a supportive environment by providing financial help and refusing those wedded to violence.
He said that the Middle East had reached a moment of opportunity, and this could be transformed into real momentum.
"We remain committed to the roadmap as the only vision of two states living side by side," he said.
Mr Abbas asked Congressmen for direct funding
Israel's planned withdrawal from the Gaza Strip could lay the groundwork for a return to the roadmap, he added.
Mr Bush also praised Mr Abbas for rejecting violence and embracing democracy.
"You have made a start on a difficult journey, requiring courage and leadership each day," he said. "And we will take that journey together."
He urged Israel to remove unauthorised settlement outposts and stop the expansion of existing settlements in the West Bank.
The US president added that Secretary of State Condoleezza Rice would visit Jerusalem and Ramallah before the Israel withdrawal from Gaza.
Mr Abbas is keen for the US to bring Israel's planned unilateral withdrawal from the occupied Gaza Strip under the auspices of the roadmap.
The roadmap plan, sponsored by the US, European Union, Russia and the United Nations, has been largely deadlocked since it was launched two years ago.
It sets out a phase-by-phase path to ending the conflict within two years, setting up a viable independent Palestinian state and ensuring a secure Israel.
Mr Abbas' visit illustrates the thaw in relations between the US and the Palestinians since the death of Yasser Arafat, who was shunned by Mr Bush.
In Gaza, BBC correspondent Alan Johnston says there is little optimism about the Washington meeting, because they believe the US will not push Israel into the kind of deal that Palestinians would find acceptable.