JERUSALEM -- U.S. Secretary of State Hillary Rodham Clinton said Saturday that Israel is making "unprecedented" concessions on West Bank settlement construction -- a position clearly at odds with the prevailing Palestinian view.

Palestinian leaders have said they will not return to peace talks with Israel unless it halts all settlement building on lands they claim for a future state, and they believe Israel has blatantly defied a U.S. demand for a settlement freeze.

Speaking at a joint press conference with Israeli Prime Minister Benjamin Netanyahu on Saturday, Clinton said Israel is putting significant limits on settlement activity.

"What the prime minister has offered in specifics on restraints on a policy of settlements ... is unprecedented," she said.

The issue of settlements has become the biggest sticking point in getting Israelis and Palestinians back to the negotiating table. Clinton made it clear that she wasn't pleased with Israeli settlement construction but that it was no reason to hold up talks.

"There are always demands made in any negotiation that are not going to be fully realized," she said.

Clinton also agreed with a statement by Netanyahu that Palestinians had never demanded a settlement freeze in the past as a condition for sitting down with Israel.

Her comments appeared to represent a significant departure in tone from her previous statements demanding a total Israeli settlement freeze without exception. Israel has been resisting that demand for months, and has given no indication it would be willing to call a total freeze.

Clinton's main aim during her one-day visit to Israel was to resuscitate the Obama administration's flagging Mideast peace push by persuading the two sides to return to talks.

But Palestinian President Mahmoud Abbas is sticking to his refusal to resume negotiations until Israel stops building settlements. Abbas is fighting a perception among his people that he repeatedly caves in to U.S. demands.

Abbas spokesman Nabil Abu Rdeneh, responding to Clinton's comments, said, "There can be no excuse for the continuation of settlements, which is really the main obstacle in the way of any credible peace process.

"Israel is not interested in stopping its settlement activities and the American administration didn't succeed in convincing the Israeli government to stop these activities," he said. "There should be a real change in the Israeli position toward this issue in order for the peace process to be restarted."

Earlier in the day, a top aide to Abbas, Saeb Erekat, told The Associated Press that Abbas rejected Clinton's request that he allow Israel's government to complete building 3,000 units in Jewish settlements in the West Bank, and to allow the government to construct public buildings and continue construction in east Jerusalem -- a territory Palestinians hope will be their future capital.

"This is a nonstarter," Erekat said. "And that's why it's unlikely to restart negotiations."

Before visiting Israel, Clinton met with Abbas in the Gulf emirate of Abu Dhabi. Besides meeting Netanyahu, Clinton also held talks with Israeli Defense Minister Ehud Barak and Foreign Minister Avigdor Lieberman.

Palestinians see Jewish settlement building as one of the biggest threats to their ability to form a viable state in the territories of the West Bank, east Jerusalem and the Gaza Strip. Some 500,000 Israelis live in settlements in the West Bank and east Jerusalem. Israel withdrew from Gaza in 2005.

Clinton intends to consult with a range of Arab foreign ministers on the Israel-Palestinian stalemate when she attends an international conference in Morocco on Monday and Tuesday.

At the press conference with Clinton, Netanyahu said Israel is "willing to engage in peace talks immediately without preconditions. Unfortunately the other side is not."

Hamas' control over Gaza is another main stumbling block to peace efforts. The group violently seized control of Gaza from Abbas' forces two years ago, leaving the Palestinians with rival governments. Hamas has long preached that Abbas' moderation doesn't pay and that only armed struggle will produce a Palestinian state.

Hamas spokesman Sami Abu Zuhri said the U.S. could not effectively engage in peacemaking while ignoring Hamas, and said Clinton's visit was "destined to fail."

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Associated Press reporter Mohammed Daraghmeh contributed to this report from Ramallah, West Bank.