Israel’s Prime Minister Ehud Olmert and President Shimon Peres greeted Bush during a ceremonial arrival at Ben-Gurion Airport near Tel Aviv, with Olmert telling him he had “the love and admiration of all the citizens of Israel”.

But Bush, making his first visit to Israel as President, almost immediately found himself confronted with the political and diplomatic controversies that have thwarted previous efforts to forge a Palestinian-Israeli peace.

A sign in a field, visible from his helicopter during the quick flight to Jerusalem, declared, “Hands off Jerusalem”, the city whose ultimate status remains among the most difficult issues dividing Israelis and Palestinians. A new barrage of rockets landed in Israel from the Gaza Strip. And Israeli settlers began erecting new outposts on Palestinian lands before dawn in Hebron.

The settlements and rocket attacks have threatened to derail the nascent progress Bush nurtured during an international conference in November in Annapolis, where the Israelis and Palestinians committed themselves to trying to negotiate a peace agreement in 2008.

Secretary of State Condoleezza Rice also stirred controversy in remarks made to reporters on the eve of Bush’s visit and published here on Wednesday in which she suggested that the US opposed any Israeli settlements in occupied Palestinian territories, including those in Har Homa.

Official American policy has been deliberately ambiguous on the matter. Officials traveling with Bush declined to clarify whether Rice’s remarks reflected a shift in American policy or were intended to press the Israelis as part of the peace effort.

Israel’s decision in December to authorise 300 new homes in Har Homa infuriated Palestinians, who said it showed that Israel was not serious about commitments it made at the Annapolis conference.

Israel annexed East Jerusalem and expanded the city’s boundaries after the 1967 war and considers areas like Har Homa to be part of Israel. The US does not recognise the annexation.

“The important point here is that one reason that we need to have an agreement is that we can stop having this discussion about what belongs in Israel and what doesn’t,” Rice said in a roundtable interview with journalists from the region.

She added that there had been “important changes since the ‘49 armistice and since the events of ‘67... And those are going to have to be accommodated in an agreement”.

Bush is scheduled to meet Olmert for extended discussions later on Wednesday, and to meet the Palestinian leader, Mahmoud Abbas, on Thursday at his administration headquarters in Ramallah. American officials have played down expectations about any breakthrough during his visit here, the first leg of a trip that will also take him to Kuwait, Bahrain, the UAE, Saudi Arabia and Egypt.

Bush, though, spoke broadly of the promise of peace, while praising the American alliance with Israel as a guarantee of “Israel’s security as a Jewish state”.

Bush’s statement was loaded with its own significance, since the reference to Israel as a Jewish nation is seen by Palestinians as an acceptance of Israel’s refusal to allow Palestinian refugees who left in 1948 and their descendants to return to their homes in what is now Israeli territory.

“We will do more than defend ourselves,” Bush said at Ben-Gurion Airport. “We seek lasting peace. We see a new opportunity for peace here in the Holy Land, and for freedom across the region.”