The US defence secretary held talks in Israel as flaring violence killed three suspected Palestinian militants in the Israeli-occupied West Bank and protesters rallied against Prime Minister Benjamin Netanyahu's hard-right government.
"I'm here as a friend who's deeply committed to the security of the State of Israel, but the United States also remains firmly opposed to any acts that could trigger more insecurity, including settlement expansion and inflammatory rhetoric," said Austin.
"We are especially disturbed by violence by settlers against Palestinians so we'll continue to oppose actions that could push a two-state solution further out of reach," he told a joint news conference with Israeli Defence Minister Yoav Galant.
Thousands of Israelis opposed to the Netanyahu government's legal reform plans had blocked roads in and around Ben Gurion airport, near Tel Aviv, forcing a last-minute change of venue for Austin's talks.
And just hours before Austin's arrival in Israel, undercover agents of Israel's border police shot dead three suspected Palestinian militants in the West Bank.
The Palestinian health ministry announced the "martyrdom" of three men shot by Israeli forces in Jaba, near the northern city of Jenin.
"We had a very frank and candid discussion among friends about the need to de-escalate, to lower tensions and restore calm especially before the holidays of Passover and Ramadan," Austin said.
He also called on the "Palestinian leadership to combat terrorism and to resume security cooperation and to condemn incitement".
In a meeting with Austin also held at Ben Gurion airport, Netanyahu said Israel and the United States had a "common agenda to prevent Iran from acquiring nuclear weapons".
Austin said in response: "You've heard us say over and over again that we are absolutely committed to the security of Israel".
Their talks came ahead of Netanyahu's departure for Rome, which protesters had sought to obstruct using their vehicles to block access roads.
Smaller demonstrations were taking place at various locations around the country, forcing Netanyahu to travel to the airport by helicopter instead of by car.
Nine straight weeks of protests have been held by opponents of the reform plans, which would give politicians greater power over the courts. They have drawn tens of thousands of demonstrators who regard the proposals as a threat to democracy.
The mounting violence in the West Bank has coincided with the tenure of Netanyahu's coalition government, which took office in December and is regarded as the most right-wing in Israeli history.
In the morning, the Palestinian health ministry announced the "martyrdom" of three men shot by Israeli forces in Jaba, near the northern city of Jenin.
The ministry identified the dead men as Sufyan Fakhoury, 26, Ahmed Fashafsha, 22, and Nayef Malaysha, 25. It did not provide further details.
'Guns and explosives'
Israeli police said special forces accompanied by soldiers had been in Jaba to arrest suspects involved in shooting attacks against soldiers in the area, including Fakhoury and Fashafsha. It said the pair were operatives of militant group Islamic Jihad.
"During the operation, shots were fired at the border police undercover officers from the wanted men's car. Border police undercover officers responded with fire, and killed the three armed men in the car," police said, adding Malaysha was also a suspected militant.
"A number of guns and explosive devices were found in the vehicle," the police said.
Islamic Jihad condemned Israel for the "heinous assassination" in Jaba.
A Tuesday raid by the Israeli military in Jenin left seven Palestinians dead, including a member of Hamas accused of killing two Israeli settlers last month.
UN Middle East peace envoy Tor Wennesland called on both Israel and the Palestinians Wednesday "to observe calm and restraint", saying the "cycle of violence... must be stopped immediately."
The Palestinian health ministry identified the seventh fatality from Tuesday's raid as Walid Nassar, 14.
Some observers fear further violence particularly around Jerusalem's holy sites during the Muslim fasting month of Ramadan, which begins in late March, and the Jewish holiday of Passover in April.
Since the start of the year, the conflict has claimed the lives of 75 Palestinian adults and children, including militants and civilians.