Israel and the Palestinians have accepted an invitation by the US and other powers to restart direct talks on September 2 in a modest step toward forging a deal within 12 months to create a Palestinian state and end one of world's most intractable conflicts.

US Secretary of State Hillary Clinton said Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas will meet with President Barack Obama on September 1, before formally resuming direct negotiations the following day at the State Department in Washington.

"There have been difficulties in the past, there will be difficulties ahead," Clinton said in a statement.

Clinton added that Egyptian President Hosni Mubarak and Jordan's King Abdullah also were invited to the talks, which will mark the first direct negotiations between Israel and the Palestinians in 20 months.

"I ask the parties to persevere, to keep moving forward even through difficult times and to continue working to achieve a just and lasting peace in the region," Clinton said.

Clinton's announcement was echoed by the Quartet of Mideast peace mediators - the United States, Russia, the European Union and the United Nations - which issued its own invitation to the talks and underscored that a deal could be reached within a year.

Netanyahu quickly accepted the US invitation and said reaching a deal would be possible but difficult.

"We are coming to the talks with a genuine desire to reach a peace agreement between the two peoples that will protect Israel's national security interests, foremost of which is security," a statement from his office said.

After a meeting in the West Bank city of Ramallah, the Palestinian leadership announced its acceptance of the invitation for face-to-face peace talks with Israel.

Settlement issue

But Saeb Erekat, the chief Palestinian negotiator, warned that the Palestinians would pull out of the new talks if the Israelis allow a return to settlement building on lands that the Palestinians seek for a future state.

Israel's 10-month moratorium on Jewish settlement building in the occupied West Bank is due to end on September 26.

The invitation to the talks "contains the elements needed to provide for a peace agreement," Palestinian leaders said.

"It can be done in less than a year," Erekat said. "The most important thing now is to see to it that the Israeli government refrains from settlement activities, incursions, fait accomplis policies."

The two sides are coming together for talks after decades of hostility, mutual suspicion and a string of failed peace efforts.

The Quartet statement was aimed at the Palestinians, who believe that the group's repeated calls for Israel to stop building settlements in the West Bank and accept a Palestinian state within the borders of land occupied since the 1967 Middle East war are a guarantee of the parameters for the talks.

Clinton's invitation was aimed at Netanyahu, agreeing with his demand that the talks should take place "without preconditions" and giving little sense of any terms that the Israeli leader fears could box him in.

The Islamist group Hamas, which controls Gaza and refuses to renounce violence against Israel, said the proposed peace talks would do nothing to help the Palestinian cause. US Middle East envoy George Mitchell said Hamas would have no role in the peace talks.

Middle East analysts say the peace process, which began in the early 1990s, established the basic outlines of a deal acceptable to both sides and identified crunch issues remaining to be resolved - though most say the task is daunting.

Clinton said the talks should include the "final status" issues such as the boundaries of a future Palestinian state, Jewish settlements in the West Bank, the right of return of Palestinian refugees and the status of Jerusalem. She urged both sides to refrain from provocative acts.

"As we move forward, it is important that actions by all sides help to advance our effort, not hinder it," Clinton said.

Mitchell, who spent months working to persuade both sides to restart direct talks, said the onus was now on them to produce results. He said the United States could offer "bridging proposals" if necessary.-Reuters