Mr Blair said the UK would offer its help
The UK has welcomed the publication of the Middle East 'road map' aimed at securing peace in the troubled region by 2005.
The plan - put forward by the US administration - proposes a two state solution with a secure Israel living side-by-side with a viable and separate state of Palestine.
Prime Minister Tony Blair said he and the rest of the British government were standing by to offer any support they could to winning the Middle East peace.
At a news conference in London, Foreign Secretary Jack Straw condemned Tuesday's suicide attack on the waterfront in Tel Aviv.
He then said the road map was an important step forward to peace.
It provided the opportunity to work together for peace in places which were overshadowed by the daily threat of violence, he added.
Mr Blair said: "I welcome the fact that the road map to peace has today been presented to the Israeli and Palestinian authorities.
"The road map provides the route to a permanent two stage solution which includes clear phases, time lines and bench marks.
"It places clear but fair obligations on both sides to achieve a final and comprehensive settlement by 2005.
"There is now a real opportunity for both sides to work with the strong support of the international community to achieve a just and lasting settlement.
"I do not underestimate the commitment it will require but the prize is enormous."
Earlier the Palestinian parliament approved a new cabinet led by Prime Minister Mahmoud Abbas - a key step in the introduction of a US-led plan for Middle East peace.
Abbas is a critic of Palestinian militant attacks on Israelis
After a day of debate, the Palestinian Legislative Council endorsed Mr Abbas' cabinet list at a meeting in the West Bank city of Ramallah by 51 votes to 18, with three abstentions.
The new cabinet under the first Palestinian prime minister is the product of intense international pressure on President Yasser Arafat to give up some of his powers and implement democratic reforms.
In his acceptance speech, Mr Abbas declared himself "very happy" before adding: "I hope the government will live up
to everybody's expectations."
The ministers in the new cabinet include both critics of Mr Arafat and loyalists from within his mainstream Fatah faction.
Mr Abbas - usually referred to as Abu Mazen - is a critic of Palestinian militant attacks on Israelis.
But his stance was rejected by the Islamic militant group Hamas, which said it would not disarm.
Ahead of the meeting, there was violence in the Gaza Strip, where Palestinian officials said at least one militant was killed and a number of others wounded in an attack by Israeli helicopter gunships.