JERUSALEM - A White House envoy tried Friday to get Israelis and Palestinians talking again after more than a year of deadlock, while confronting a second challenge -- navigating the rocky relations between Israel and the U.S.

Senator and veteran negotiator George Mitchell's most important meeting was Friday afternoon with Prime Minister Benjamin Netanyahu, who has rejected Washington's calls for a halt to Israeli construction in east Jerusalem and has seen tensions with Israel's most important ally rise dramatically on his watch.

"I look forward to working with the Obama administration to move peace forward," Netanyahu told Mitchell at the beginning of the meeting. "We are serious about it, we know you are serious about it and we hope the Palestinians respond."

The prime minister's office said the meeting went well and Netanyahu and Mitchell would convene again on Sunday.

Netanyahu said in a televised interview Thursday that there would be no construction freeze in east Jerusalem, repeating a position that has brought him into conflict with President Barack Obama. Israel annexed the traditionally Arab sector in 1967, which is now home to around 180,000 Jews and 250,000 Palestinians. Israel sees the eastern sector of the city as part of its capital, while Palestinians want it for their own capital.

Nonetheless, Israeli government officials said Friday they were optimistic that indirect negotiations between the sides would be announced during Mitchell's visit, allowing Israelis and Palestinians to begin negotiating again for the first time since late 2008.

The officials spoke on condition of anonymity because the government made no formal statement on what the talks with Mitchell were expected to cover.

Mitchell held talks with Israel's defense minister, Ehud Barak, earlier Friday and was to meet President Shimon Peres. He was scheduled to follow up those talks by meeting Palestinian leaders, including President Mahmoud Abbas.

The Palestinians have said they will not hold direct negotiations with Israel as long as construction continues in Israel's West Bank settlements and in east Jerusalem. The indirect talks, in which Mitchell is expected to shuttle between the sides as a mediator, are designed to allow the Palestinians to resume negotiations without officially dropping their demands.

But they also show the extent to which the sides -- who had been talking directly for nearly two decades -- have become estranged.

Netanyahu has curbed building in the West Bank but has said repeatedly that no restrictions will apply in east Jerusalem.

Palestinian negotiator Saeb Erekat criticized Netanyahu's newest statement on Jerusalem, while indicating Palestinians could agree to resume talks anyway.

"We should give the proximity talks the chance they deserve, but at the same time, it is evident after Mr. Netanyahu's statements last night that this Israeli government is determined to continue the course of settlements, dictation and confrontation and not peace and reconciliation," he said.

Palestinians will begin indirect talks, Erekat said, if Israel agrees not to initiate new construction projects in Jerusalem and cancels plans for 1,600 new housing units in an east Jerusalem neighborhood. The announcement that those units had been approved was made during a visit to Israel in March by U.S. Vice President Joe Biden and angered the Obama administration.

Direct talks will only be possible if Israel freezes all construction in the West Bank and east Jerusalem, he said.