Israeli Defense Minister Ehud Barak downplays the differences between the US and Israel over the issue of settlements as "only one component" in the peace process.
"We must put this issue in perspective, bearing in mind that it is only one component in the context of an overall agreement for peace with the Arab world," Barak told Israeli public radio on Wednesday.
The remarks followed his meeting with the US special envoy to the Middle East, George Mitchell, in New York.
Mitchell repeated the White House’s demand for an end to Israel’s settlement activity in the occupied Palestinian territories in the West Bank.
The former premier acknowledged the disagreements between Washington and Tel Aviv on the issue. "We have not been at an impasse and we are not at one now."
Following years of silence, the US is now at odds with its closest Middle East ally over the issue of Israeli settlements with President Barack Obama pressing for a complete halt in the expansion of settlements.
This is while Hawkish Israeli Prime Minister Benjamin Netanyahu has rejected Obama’s call, saying the "natural growth" of existing settlements should be enshrined in any peace deal.
The rift became deeper after a meeting between Netanyahu and Mitchell was cancelled last week.
According to Barak, however, Israel and the US are inching their way toward a compromise on settlements, which would avoid the complete freeze that President Obama has demanded.
Currently some 280,000 Israelis live in over 100 settlements scattered across the West Bank, causing major obstacles to the creation of a viable Palestinian state and compromising the prospect of peace negotiations.
Palestinians refuse to hold talks with Israel as long as it continues its illegal settlement activities.