Under pressure from the Obama administration, Israeli Prime Minister Benjamin Netanyahu has for the first time endorsed a two-state solution in the Middle East, drawing praise from the West but flak from Palestinians who rejected the offer citing the tough conditions attached.

In a policy speech that came a week after US President Barack Obama's address to the Muslim world, Netanyahu said the "Palestinian state" will have to be demilitarised and recognise Israel as a state of the Jewish people. "Israel cannot agree to a Palestinian state unless it gets guarantees it is demilitarised," he said. "I call on you, our Palestinian neighbours, and to the leadership of the Palestinian Authority, Let us begin peace negotiations immediately, without preconditions," the Israeli premier said. The hardliner Israeli premier has resisted agreeing to a two-state solution to the Israel-Palestinian conflict all through his political career and his veiled acceptance was couched under several other conditions, including refusal to allow Palestinian refugees to settle in Israel and keeping united Jerusalem the capital of the Jewish state. With all these conditions, Israel "will be ready in a future peace agreement to reach a solution where a demilitarised Palestinian state exists alongside the Jewish state," Netanyahu said.

The address at Bar Ilan university, considered the bastion of Israeli right, came in the wake of Obama's insistence that Israel impose a complete freeze on West Bank settlement construction and recognise the two-state solution. The White House said Obama welcomed the speech as an "important step forward" while the European Union described it as "a step in the right direction".

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