US Secretary of State John Kerry was holding late-night talks with the leadership in Jerusalem and Ramallah on Monday on his latest mission to salvage the crisis-hit peace process.
He flew in from Paris for what was expected to be little more than a 15-hour visit to push both sides to resolve a lingering dispute over Palestinian prisoners which is threatening to derail the negotiations ahead of an April 29 deadline.
US peace efforts are teetering on the brink of collapse after Israel refused to free a group of 26 veteran Palestinian prisoners under an agreement which brought the sides back to the negotiating table in July 2013.
Furious Palestinian officials have warned that unless Israel changes its stance on the prisoner releases, it could signal the end of the talks.
Kerry, who landed in Tel Aviv shortly after 1600 GMT, went straight to Jerusalem and began talks with Israeli Prime Minister Benjamin Netanyahu accompanied by his envoy Martin Indyk and US ambassador Dan Shapiro, an AFP correspondent said.
Israel's chief negotiator Tzipi Livni was also present.
He was later expected in Ramallah for talks with Palestinian president Mahmoud Abbas who has spent the evening locked in a key leadership meeting in Ramallah to discuss the standoff.
Washington has been fighting an uphill battle to coax the two sides into accepting a framework proposal which would extend the negotiations beyond April 29 to the end of the year.
But shortly before Kerry landed, a Palestinian official told AFP Ramallah had rejected a fresh Israeli offer to extend talks, describing it as "blackmail".
The question of extending the talks has become intricately tied up with the fate of the 26 prisoners.
Just a day ahead of the expected releases, Israel said it would not free detainees convicted of deadly attacks unless the Palestinians would commit to extending the negotiations.
But the Palestinians say they will not even discuss any extension of the negotiating period unless Israel frees the prisoners.
The impasse has triggered "intense" US efforts to resolve the dispute, with Kerry speaking with both sides earlier on Monday.
US State Department spokeswoman Jen Psaki said Kerry's team had been working with both parties to "agree on a path forward".
"After consulting with his team, Secretary Kerry decided it would be productive to return to the region," she told reporters in Paris shortly before departing for Tel Aviv.
The US decision to fly Kerry in came after a late-night meeting between the negotiating teams in Jerusalem at which Israel had made a fresh proposal for extending the negotiations which was rejected by the Palestinian leadership.
"Israel made a proposal which was refused by the Palestinians," a Palestinian official told AFP.
"Israel is practising a policy of blackmail and linking its agreement to releasing the fourth batch of prisoners with the Palestinians accepting to extend the negotiations," he said.
In exchange for Palestinian agreement to continue the talks, Israel had offered to free the fourth batch of detainees and to release another 420 others.
But that number would involve only common law criminals and not sick detainees, women or children. And it would not include political heavyweights.
And although the Israelis were offering a partial settlement freeze in the West Bank, it would not be extended to annexed east Jerusalem, nor would it cover construction where tenders had already been published.
"The Israeli proposal aims to continue the negotiations indefinitely, without any results, in parallel with continued settlement building," he charged, saying such policies posed a "real danger" to the peace process.
On Sunday, Netanyahu said the fate of the peace process would be sealed within the coming days, saying any deal to extend talks beyond April would have to be put to the cabinet.
It was Kerry's first visit to Israel and the Palestinian territories since early January, although he has held face-to-face meetings with both Netanyahu and Palestinian leader Mahmud Abbas in Europe and the United States.
He also met Abbas last week in Amman.