US Secretary of State John Kerry was meeting with Israeli Prime Minister Benjamin Netanyahu on Wednesday just hours after the Palestinians threatened to bolt the peace talks over settlement building.
Kerry's arrival in the region comes as a growing number of voices on both sides warned that the negotiations, which resumed in late July following months of shuttle diplomacy by Kerry himself, were on the brink of collapse.
In a symbolic gesture, Kerry's first stop on landing on Tuesday evening was to visit the Tel Aviv square where the late prime minister Yitzhak Rabin was gunned down 18 years ago by a rightwing Israeli opposed to the peace talks.
"He dared to take the risks for peace, not just because it was important to take the risks, but that it was vital to secure the future of Israel and the region," Kerry said after laying a wreath in the square.
But just hours later, following a stormy meeting between negotiators from both sides in Jerusalem, a senior Palestinian official said his delegation would not be able to continue talking in light of latest Israeli moves to advance settlement construction.
"The Palestinian-Israeli negotiations broke down during the session on Tuesday night," the official told AFP, speaking on condition of anonymity.
"The Israeli side is determined to continue its settlement and we cannot continue negotiations under these unprecedented settlement attacks," he warned.
Over the past week, Israel has announced plans to move forward with thousands of new settler homes, a large percentage of them in annexed Arab east Jerusalem.
The settlement issue, which has sent tensions soaring, was expected to come up in Kerry's talks with Netanyahu in Jerusalem.
Immediately after the meeting, the US diplomat was to head to the southern West Bank city of Bethlehem for talks at 1100 GMT with Palestinian president Mahmud Abbas, who was also expected to drive home the problem of settlements.
Later in the day, Kerry was to meet Israeli President Shimon Peres Kerry before meeting with Netanyahu for a second time, over dinner, officials said.
Speaking to reporters in Tel Aviv's Rabin Square, Kerry sent a clear message to Israel's leaders, urging them to seek peace "with the same determination prime minister Rabin showed".
Local media on Tuesday reported that Israeli negotiators sought to have the separation barrier that cuts through the West Bank serve as the border of a future Palestinian state.
"Israel's opening position was that the border be the route of the separation barrier, and not the 1967 lines as the Palestinians have demanded," public radio reported, a story that also ran in the top-selling Yediot Aharonot newspaper.
The Palestinians insist borders should be based on the lines that existed before the 1967 Six-Day War, when Israel seized Gaza and the West Bank, including Arab east Jerusalem.
But Netanyahu has rejected any return to the 1967 lines as "indefensible", saying it would not take into account the "demographic changes on the ground" -- a clear euphemism for Jewish settlements.
Israel began work on its sprawling "security fence" in 2002 at the height of the second intifada or uprising, and has defended its construction as a crucial protective measure, pointing to a drop in attacks inside Israel as proof of its success.
The Palestinians, who refer to it as the "apartheid wall", say the barrier is a land grab, pointing out that when complete, 85 percent of it will have been built inside the West Bank.
There was no confirmation of the reports from Netanyahu's office, which has refused to comment on the content of the ongoing peace talks in line with a US-requested media blackout since they resumed in late July.
Ahead of Kerry's arrival, Israeli media reported that Washington was working on a proposal for a new interim agreement.
But the reports were flatly denied by Kerry.
"There is no other plan at this point in time," he told reporters in Riyadh on Monday.