Bush urges Israeli occupation end
Mr Bush's statement is the diplomatic highlight of his visit
US President George W Bush has said Israel must end its occupation of some Arab land to enable the creation of a viable Palestinian state.
He also urged a solution to the issue of Palestinian refugees that would involve paying them compensation.
It is thought to be Mr Bush's strongest public statement pressing Israel to give up land it seized in the 1967 war.
He was speaking in Jerusalem following two days of separate talks with Israeli and Palestinian leaders.
He has been trying to encourage the two sides into peace talks, and says he wants a peace deal signed by the time he leaves office in January 2009.
Now is the time to make difficult choices
US President George W Bush
In pictures: Bush in W Bank
Middle East tour diary
Bush statement in full
Mr Bush said in a statement: "It is vital that each side understands that satisfying the other's fundamental objectives is key to a successful agreement."
He said this would require:
secure recognised and defensible borders for Israel
a viable, contiguous, sovereign and independent Palestinian state
He added: "Agreement must establish Palestine as a homeland for the Palestinian people just as Israel is a homeland for the Jewish people."
Stern warning
Mr Bush did not give details of precisely what a final agreement might contain - he said that would be a matter for the talks.
But his statement set out some parameters within which he expected negotiators to work.
These included:
Palestinian refugee families should be compensated, rather than returning to former homes in what is now Israel
adjustments to the pre-1967 boundaries "to reflect current realities" - a reference to Israeli settlements in the occupied West Bank
He issued a stern warning to both sides not to do anything which breaks promises they have already made, or which might make negotiations more difficult.
OBSTACLES TO PEACE
History of negotiations
Jerusalem
Water
Refugees
Borders and settlements
"On the Israeli side, that includes ending settlement expansion and removing unauthorised outposts.
"On the Palestinian side, that includes confronting terrorists and dismantling terrorist infrastructure," he said.
Most recent attacks on Israel have come from inside Gaza, which is run by the Islamic militant group Hamas, and not Mr Abbas.
However, Mr Bush made no direct reference to Gaza in his statement.
And he underlined the US commitment to Israeli security.
Mr Bush goes on to Gulf states on Friday, some of which have been less hostile to Israel than other Arab states. He urged Arab states to reach out to Israel - a step he said was "long overdue".
BBC NEWS | Middle East | Bush urges Israeli occupation end
about fuckin' time but seriously, NOW? conveniently when he's about to leave office?