Israel's premier has lauded Arab peace moves as "revolutionary", but stressed he did not accept the entire Arab plan.
Mr Olmert is struggling with very low voter approval ratings
Ehud Olmert gave a series of interviews with Israeli newspapers in response to the revival of a 2002 Saudi peace plan, adopted at the Arab summit in Riyadh.
He said: "We do not delude ourselves - they want us to go back to the 1967 borders and also the right of return".
Returning the 1948 Palestinian refugees to what is now Israel, is "something we certainly can't agree to", he added.
Israel rejected the Saudi plan out-of-hand when it was first proposed five years ago.
The governments of Ariel Sharon and Mr Olmert favoured unilateral withdrawals from some of the land occupied in 1967 to "disengage" from the Palestinians.
However, the idea of disengagement was discredited in 2006 when a wave of missile attacks were launched by Palestinian and Lebanese militants from territory Israel had unilaterally withdrawn from.
The Arab plan offers the setting up of normal ties with Israel by all Arab states in return for ending the occupation of Syrian and Palestinian land and the creation of a Palestinian state.
SAUDI MIDDLE EAST PLAN
First adopted by Arab League in 2002
Calls for "full Israeli withdrawal from all the Arab territories occupied since June 1967"
Calls for Israel's "acceptance of an independent Palestinian State, with East Jerusalem as its capital"
All Arab states would establish "normal relations... with Israel" and "consider the Arab-Israeli conflict ended"
Calls for a "just solution to the Palestinian refugee problem"
It also calls for a "just solution" to the refugee question - in line with in UN General Assembly Resolution 194. This resolution proposes that Palestinian refugees should be allowed to go back to their homes or be compensated.
Mr Olmert said this week's Arab League summit in Riyadh, which had re-endorsed the plan, demonstrated a "revolutionary change in outlook".
"The countries who count in the Arab world have started to understand that Israel is not their biggest worry," he told Haaretz newspaper.
He told Yediot Ahronot there was "a real chance that within five years Israel will be able to reach a comprehensive peace deal with its enemies".
Mr Olmert is struggling with very low approval ratings among Israeli voters, with just two percent saying they trusted their prime minister in a recent opinion poll, and more than two-thirds saying they want him to resign.
More than four million UN-registered Palestinian refugees claim the right to return to homes and land taken over by Israel in 1948.
Israel fiercely opposes the refugees' claim because it would spell the end of the Jewish majority in the Jewish state.