US Secretary of State John Kerry urged Israel's government on Friday to prevent further settlement construction where possible to help revitalize Middle East peace hopes, but stressed that the Jewish state and Palestinians alike should remain focused on the larger goal of restarting direct negotiations.

Explaining part of the strategy of his now 2-month-old peace initiative, Kerry said Israeli Prime Minister Benjamin Netanyahu's government can stop only some of the settlements being built in lands contested by the Israelis and Palestinians - and in those cases it should act.

Unlike in previous US-led mediation efforts, however, he stopped short of demanding a full settlement freeze and said the contentious issue could better be handled through a quick restart of direct Israeli-Palestinian negotiations.

The Palestinians have long demanded an end to such construction before returning to talks, which have hardly occurred at all in the last four years.

The US has supported Netanyahu's demand for negotiations to restart without preconditions - an endorsement renewed by Kerry after two days of talks in Jerusalem and Ramallah with Israeli and Palestinians leaders.

Kerry said it was important not to let settlements stand in the way of talks that could finally set borders as part of a peace agreement. Then, he said, the issue would be resolved because each side would have clear boundaries for their two states.

Despite the continued difficulties in even getting the Israelis and Palestinians back to the negotiating table, Kerry insisted he believes peace is possible.

Earlier on Friday, he met Netanyahu for the second time in as many days and then spoke with outgoing Palestinian Prime Minister Salam Fayyad.

On Thursday, Kerry praised Netanyahu for the "seriousness" with which he is looking at ways to revitalize peace hopes.

Kerry's trip, however, only seemed to prompt more pessimism from Palestinian officials about chances for peace.

They say they are planning to resume their campaign of seeking membership in key international organizations as early as next month in a bid to put pressure on Israel into offering some concessions.

Without major US pressure on Israel, the outlook seems bleak. The most immediate divide concerns the issue of Israeli settlement buildings in the West Bank and east Jerusalem - lands that Israel conquered in the 1967 Mideast war and which the Palestinians hope to include in their state.

Last week, Kerry called Netanyahu to complain about a move to legalize four previously illegal settlements in the West Bank, according to US officials. Publicly, however, he has taken a softer touch and Palestinians are dismayed.

Kerry brought "nothing new" to his discussions on Thursday with Palestinian President Mahmoud Abbas, lamented one Palestinian official familiar with the talks.

The official, who spoke on condition of anonymity because he wasn't authorized to speak publicly on the private meetings, said Palestinian expectations remain low because they see Kerry "trying to accommodate the Israelis, not pressure the Israelis".

While Palestinians have praised Kerry's efforts, they say there has been little progress ahead of what they believe to be a June 7 deadline for action. They are already beginning work on a "day-after" strategy.