By Jeremy Bowen
BBC Middle East Editor
Washington welcomed Netanyahu's speech, but is unlikely to concede on settlement natural growth
The fact that Israeli Prime Minister Benjamin Netanyahu felt it necessary to make a speech at all about a Palestinian state shows that American pressure works.
US President Barack Obama has taken every opportunity he can to restate his view that the only chance of Middle Eastern peace lies with the creation of a Palestinian state alongside Israel.
Had Mr Netanyahu been prepared to concede the principle of some form of statehood for Palestinians after the Israeli elections in February he might have emerged with a centre-right coalition rather than one dominated by the hard right.
But he did not feel he had to until the Americans indicated he should.
The Israeli prime minister's body language suggested that he was doing it under diplomatic duress.
One Israeli journalist observed that he looked like someone vomiting up the words "Palestinian state".
That was because the idea, however hedged around with conditions, is anathema to his ideology.
Mr Netanyahu, who understands communication via the TV camera, might also have chosen to emphasise a certain distaste for what he was doing, to send a message to his own supporters that he did not like it, and he was going to make sure that they would be talking about Israel's vision of Palestinian independence, and not the Palestinians' own.
Reaction to speech
The speech was billed as an answer to President Obama's in Cairo.
But Mr Netanyahu used a very different tone to the new and generous one adopted by President Obama.
The Israeli prime minister selected a key that is squarely in the tradition of the conflict, which would be recognised by his supporters without alarming them too much.
Creating a Palestinian state is the only real big idea that the Americans and their allies have for ending almost a century of conflict between Jews and Arabs.
Previous Israeli prime ministers have accepted it.
By taking part in the Oslo peace process in the 1990s, again with public displays of reluctance, Mr Netanyahu also bought into the principle. So it was unlikely that he would be able to resist American pressure for long.
The attitude in Washington seems to be that you have to start from somewhere.
The first response of the White House was to welcome what he said, without going into the way he said it or the conditions he laid down, which incidentally are not new.
Even though the Palestinians have responded angrily to what was said, they must have guessed that Mr Netanyahu was never going to make a speech that would conform to their view of the future.
Even so, once you move beyond the fact that the Israel's prime minister has used the words Palestinian state, there was not much in the speech to encourage those people who still dream of negotiations leading to peace.
It does not even get things back to where they were under Ehud Olmert, the previous prime minister.
Not only did he call for a Palestinian state, Mr Olmert also said Israel needed to pull out of "almost all" of the occupied territories.
Next US moves?
Mr Netanyahu's starting point is a description of a state without real sovereignty.
There was no mention of the Arab peace initiative, which offers peace and recognition in return for full withdrawal from occupied territory and a just solution for refugees.
Perhaps most important for his audience in Washington, Mr Netanyahu has not moved an inch on President Obama's request that Israel stop all building in the settlements in the occupied Palestinian territories.
Under international law it is illegal for an occupier to settle its people on the land it has taken.
Mr Netanyahu would like some give and take on settlements.
He has given a bit on a Palestinian state. He would like Washington to let him take something on settlements, which most of his coalition believes are just, necessary and entirely legal.
But it is unlikely that President Obama will give up on settlements.
If he did, he would forfeit the goodwill he has been building up among Arabs and undermine one of his main objectives, which is to rebuild America's power to persuade in the Middle East.
Letting the Israeli government off the hook on settlements would also, correctly, look like a defeat.
President Obama and his advisers will now be pondering their next moves.