US Vice President Joe Biden has said "good faith negotiations" can recognise Israeli security needs and the Palestinian goal for a viable state.

Biden is urging Israel to make a serious attempt to reach peace with the Palestinians. He says an agreement is "profoundly" in the interest of both Israelis and Palestinians.

In a speech at Tel Aviv University on Thursday, Biden also repeatedly voiced Washington's commitment to Israel's security, trying to allay any concerns the Jewish state might have.

But he also said an end to the conflict would restore to the Palestinians "the fundamental dignity and self-respect that their current predicament denies them."

Palestinians have threatened to pull out of US-mediated peace talks with Israel before the negotiations start.

The two sides agreed this week to resume indirect talks through a US mediator.

But the Palestinians said Israel's plan to build 1,600 new homes in disputed east Jerusalem makes it difficult to return to the negotiating table.

"To end this historic conflict, both sides must be historically bold," Biden said. "If each waits stubbornly ... this will go on for an eternity."

The vice president's trip had been meant to repair strained ties between Israel and the Obama administration.

However, the Israeli plan to build new homes in east Jerusalem -- the section of the city claimed by the Palestinians for a future state -- quickly overshadowed the visit.