Israeli Prime Minister Benjamin Netanyahu delivers a speech in his office in his Jerusalem office December 28, 2016. [Photo/Agencies]

"In the end, we could not in good conscience protect the most extreme elements of the settler movement as it tries to destroy the two-state solution," he said. "We could not in good conscience turn a blind eye to Palestinian actions that fan hatred and violence. It is not in US interests to help anyone on either side create a unitary state."

His parting words were unlikely to change anything on the ground between Israel and the Palestinians or salvage the Obama administration's record of failed Middle East peace efforts.

Netanyahu said Kerry "obsessively dealt with settlements" and barely touched on "the root of the conflict - Palestinian opposition to a Jewish state in any boundaries".

In a statement, Palestinian President Mahmoud Abbas said he was convinced peace with Israel was achievable, but stood by his demand that Israel halt settlements before talks restart.

Netanyahu, for whom settlers are a key constituency, has said his government has been their greatest ally since Israel captured the West Bank and East Jerusalem in a 1967 war. Some 570,000 Israelis now live in the West Bank and East Jerusalem, together home to more than 2.6 million Palestinians.