Israeli and Palestinian leaders have agreed to negotiate on the fundamental issues dividing them, as the US president prepares to tour the region.
Mr Bush (c) will hope to build on the Maryland summit
Palestinian leader Mahmoud Abbas and Israeli PM Ehud Olmert vowed at a US summit last year to try to achieve a two-state solution by the end of 2008.
Officials say the two men agreed to tackle thorny issues such as Israeli settlements and Palestinian refugees.
Mr Bush hopes to kick-start the process when he arrives on Wednesday.
The US president has said there will be three main themes to his first visit to the region.
He said Palestinians need to have a clearly defined vision of a state that can exist alongside Israel, and both Palestinians and Israelis need to fulfil their obligations to bring about this vision.
He also repeated that the US was committed to security in the region. But correspondents say many Israelis and Palestinians are sceptical about the chances for progress.
Officials say the leaders' talks in Jerusalem were intended to keep up the momentum achieved at the peace conference in Annapolis, Maryland, in November.
Chief Palestinian negotiator Saeb Erekat said it had been agreed that Israeli Foreign Minister Tzipi Livni and former Palestinian Prime Minister Ahmed Qurei, also known as Abu Ala, would "start intensive meetings to immediately discuss all core issues of a final status agreement."
"The president [Abbas] urged that the year of 2008 be made the year to reach peace. The intention is to see to it that we give peace a chance," Mr Erekat said.
Israeli settlement construction remains a key problem
But the BBC's Bethany Bell in Jerusalem says the rows over Israeli settlement construction in occupied East Jerusalem and of militant rocket fire into Israeli territory have not gone away.
Mr Olmert has expressed particular concern at one rocket attack that reached as far as the Israeli town of Ashkelon, 15km (nine miles) from the border.
For their part, the Palestinians are angry that Israel wants to build more than 300 new apartments in a disputed part of Jerusalem.
Abbas spokesman Nabil Abu Rudeina said: "We are expecting that President Bush will get Israel to freeze settlement activity."
Tougher questions remain
The Palestinians have also accused Israel of stepping up raids in the occupied territories ahead of Mr Bush's visit.
A further issue is the removal of Israeli outposts in the West Bank.
Beyond that even tougher questions remain - the Palestinians made refugees since Israel's creation in 1948 and the sovereignty of Jerusalem.
Mr Abbas also faces the problem of Gaza - under the control of militant group Hamas since his Fatah faction was thrown out last summer.
Militant rocket fire continues into Israel from Gaza, sparking Israeli military responses.
The two leaders have had regular meetings for several months but little post-Maryland progress has been reported.