Jerusalem - In a direct challenge to President Barack Obama's commitment to rejuvenate moribund Mideast peace talks, Israel on Thursday dismissed American-led efforts to establish a Palestinian state and laid out new conditions for renewed negotiations.

    Leaders of Israel's hawkish new government told former Maine Sen. George Mitchell, the special U.S. envoy, that they aren't going to rush into peace talks with their Palestinian neighbors.

    Israeli Prime Minister Benjamin Netanyahu said that he'd require Palestinians to accept Israel as a Jewish state in any future negotiations - a demand that Palestinians have up to now rejected - Israeli government officials said.

    Israeli Foreign Minister Avigdor Lieberman told Obama's envoy that past Israeli concessions led to war, not peace.

    These were Mitchell's first meetings with Israeli leaders since Netanyahu's center-right government took power two weeks ago.

    Palestinian leaders have said they won't open peace talks with Netanyahu's government until it agrees in principle to the idea of a two-state solution and imposes a freeze on building Jewish housing in the West Bank.

    As expected, Mitchell made it clear that the Obama administration sees the two-state solution as the foundation for future talks.

    "U.S. policy favors - with the respect to the Israeli-Palestinian conflict - a two-state solution, which would have a Palestinian state living in peace alongside the Jewish state of Israel," Mitchell said before meeting with Lieberman.

    Netanyahu has refused to embrace that formula and has instead floated the idea of offering Palestinians limited rights that would fall short of independence.

    Netanyahu reiterated his stand in his meeting with Mitchell, said one Israeli government official, who spoke on the condition of anonymity because he wasn't authorized to publicly discuss the details of the conversation.

    Netanyahu also indicated that Palestinians would have to accept Israel as a Jewish state in negotiations.

    "For us, this is a crucial element," the official said. "It's a fundamental element in peace talks."

    In recent years, Israeli leaders have been pushing this demand as a way to ensure that the nation retains its Jewish identity. However, compelling Palestinians to accept the idea would all but require them to abandon their demands that Palestinian refugees be allowed to return to homes they abandoned when Israel was established in 1948.

    Yossi Alpher, a former official with Israel's Mossad spy agency and a co-founder of the bitterlemons.org Middle East political Web site, said that Netanyahu's conditions could be a poison pill that prevents any peace talks from getting under way.

    "The position he took today cannot in any way generate a peace process," Alpher said. "The Palestinians are not going to offer him this recognition. It could be a deal-breaker, but it could be an opening gambit. It's too early in this whole new process to tell."

    Mitchell also faced resistance from Lieberman, an ultranationalist Israeli leader who began his tenure as foreign minister by declaring the death of the U.S-led peace talks that then-President George W. Bush launched in November 2007.

    Lieberman told Mitchell that 15 years of faltering peace talks with Palestinians "brought neither results nor solutions," the foreign minister's office said after the meeting.

    Real stability, Lieberman said, would require an American focus on preventing Iran from obtaining a nuclear weapon.

    Israeli President Shimon Peres, who sought to quash growing concerns that Israel might attack Iran if international diplomacy fails, echoed that sentiment.

    "Wide international cooperation must be created on the Iranian issue but, at the same time, all the remarks about a possible attack on Iran by Israel are not correct," Peres said. "The solution with Iran is not military."

    Peres called 2009 "a decisive year in the Middle East. We do not have time to waste."

    Mitchell will meet Friday with Palestinian leaders, who are expecting the Obama administration to put more pressure on Israel to negotiate seriously.