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US President Barack Obama on Sunday invited Prime Minister Benjamin Netanyahu to meet him at the White House, even as the Israeli leader rebuffed a key US demand to halt settlement construction in east Jerusalem.

The invitation for the Tuesday meeting to discuss Middle East peace efforts was handed to Netanyahu by Obama's Middle East envoy George Mitchell at the start of a meeting on Sunday, Netanyahu's office said.

Netanyahu was due to leave for Washington later on Sunday to meet US officials and Jewish leaders.

Earlier, Netanyahu vowed there would be no halt to settlement building in east Jerusalem, but in an apparent concession to the US, he said Israel was willing to widen the scope of planned indirect talks with the Palestinians.

His comments on settlements were quickly denounced by Palestinian president Mahmud Abbas as unhelpful to attempts to restart talks. Abbas also condemned the recent killing of four Palestinians in the West Bank by Israeli forces.

"Our policy on Jerusalem is the same as all previous governments of Israel for the last 42 years, it has not changed," Netanyahu said ahead of Sunday's weekly cabinet meeting.

"As far as we are concerned building in Jerusalem is the same as building in Tel Aviv and this is something we have made very clear to the US administration."

The hardline premier said he had spelled out his position in a letter to US Secretary of State Hillary Clinton, who had demanded a series of Israeli steps to end a crisis over settlement-building in the Holy City.

Israel and the United States have been at loggerheads for the past two weeks after the Jewish state announced plans to build 1,600 new homes for settlers in east Jerusalem during a visit by US Vice President Joe Biden.

Netanyahu's office said he had suggested "mutual confidence-building measures" that could be carried out by Israel and the Palestinians.

He also said on Sunday that Israel had agreed that all issues could be discussed at planned indirect -- or "proximity" -- talks that were delayed by the settlement row, reportedly another US demand.

"We have also made clear that in the proximity talks both sides can raise any issues that are in dispute," Netanyahu said.

"But a real solution to the basic problems between us and the Palestinians can only be solved during direct talks and peace negotiations."

Netanyahu later met visiting UN chief Ban Ki-moon, who said he would encourage Arab states to support proximity talks.

Ban had earlier toured the Gaza Strip where he slammed Israel for blockading the Hamas-ruled territory, saying it was causing "unacceptable suffering."

It was Ban's second visit to Gaza since the war that ended in January 2009 in which some 1,400 Palestinians were killed and thousands of houses were severely damaged or destroyed. Thirteen Israelis were killed in the conflict.

Mitchell, who arrived in the region on a visit originally set for last week but postponed by the controversy, was set to hold talks on Monday with Abbas, who had threatened to call off indirect talks with Israel in protest at the settlement announcement.

Abbas's spokesman Nabil Abu Rudeina said on Sunday that "Netanyahu's declarations don't help the return to negotiations."

"The Israeli escalation and the killing of Palestinians on a daily basis is the actual response of the Israeli government to the Palestinians, the Arabs and to American (peace) efforts, and an answer to the Quartet's statement," Abu Rudeina said, quoting Abbas.

Meeting in Moscow on Friday, members of the Middle East peace Quartet -- the European Union, Russia, the United Nations and the United States -- came out with an ambitious prescription for getting moribund peace talks back on track.

They called on Israel to freeze all settlement activity, dismantle settlement outposts erected since March 2001 and stop house demolitions in annexed east Jerusalem.

The last round of peace talks collapsed at the start of the Gaza war.

The latest manoeuvring came amid a rise in violence in the occupied West Bank, where four Palestinians were killed in weekend clashes with Israeli soldiers, including two on Sunday the military said were shot dead after trying to stab a soldier.

AFP