Israeli Prime Minister Benjamin Netanyahu, in front of President Obama and the media, explicitly rejected the president's call for a Palestinian state based on the pre-1967 borders.
Sitting beside Obama following a private Oval Office meeting, the visiting prime minister said Friday that he values the president's efforts to advance the peace process and intends to work with him. But he said the president's call for Israel to pull back to the borders that existed before the Six-Day War is not tenable.
"We can't go back to those indefensible lines. ... I discussed this with the president," Netanyahu said.
The meeting marked an especially tense moment for the two heads of state. The U.S.-Israeli relationship has endured several tests since Obama took office, and the president's endorsement of a key Palestinian statehood demand in his major address on Middle East policy Thursday was no exception.
Netanyahu on Friday echoed concerns of other Israelis that a full return to the 1967 borders could leave Israel vulnerable and would not result in a lasting peace.
"We both agree that a peace based on illusions will crash against the rocks of Middle Eastern reality. ... For there to be peace, the Palestinians will have to accept some basic realities -- the first is that while Israel is prepared to make generous compromises for peace it cannot go back to the 1967 lines, because these lines are indefensible" Netanyahu said. He said the two leaders still agree on the "overall direction" for peace in the region.
Obama, speaking to reporters, did not mention his border demand but stood by his Middle East speech. Obama said Friday that differences remain between the United States and Israel over the Middle East peace process, but that their relationship is "sound and will continue" and differences will be worked out "between friends."
Showing some common ground, both leaders stressed that Hamas, a U.S.-designated terror group which recently announced a unity agreement with Fatah, is not a reliable partner in peace talks.
The U.S. had previously endorsed the concept of a Palestinian state, but not the demand for permanent pre-1967 borders, with mutually agreed land swaps.
The immediate concern among pro-Israel lawmakers and advocates was that Obama's policy shift will give Palestinians a new starting point in negotiations, rather than something to work toward over the course of talks.
Josh Block, former spokesman for The American Israel Public Affairs Committee, told FoxNews.com that Obama "repeats the error" made when his White House pressed the Israelis on settlement construction, granting the Palestinians more leverage in talks.
The talks have since stalled and Obama's Middle East envoy has resigned. Block said Obama's new position will not help matters.
"This strategic error is manifold, and undermines, not advances, the prospects for peace talks," he said in an email.
White House Press Secretary Jay Carney acknowledged the position does create a starting point for talks, but claimed the two sides would still have plenty to negotiate when it comes to land swaps and security arrangements.
Obama is set to address the AIPAC conference on Sunday. Other Jewish advocacy groups said Obama's position merely puts the U.S. on record in support of a plan that had a good chance of being the basis for a compromise anyway.
"There will be the naysayers who can find something to protest from this address, including what is widely accepted wisdom -- that a final resolution will ultimately be based on 1967 lines with mutually agreed swaps," The National Jewish Democratic Council said.
Despite the shift, the president sought to assure that the United States' commitment to Israeli security is "unshakable."
He said Thursday and Friday that Israel's right to defend itself will remain paramount, and suggested the recent unity agreement between Fatah and Hamas, which the U.S. deems a terrorist group, is problematic for negotiations. Though Israel occupied East Jerusalem, along with the West Bank and Gaza Strip, in the 1967 Six-Day War, Obama said Thursday that the "future of Jerusalem" remains to be worked out, as does the fate of Palestinian refugees.
He also publicly rejected attempts by the Palestinians to gain recognition for their own state before the United Nations. "Symbolic actions to isolate Israel at the United Nations in September won't create an independent state," Obama said.
Netanyahu is laying down demands of his own. He said in a speech to his parliament before traveling to Washington that he's opposed to talks with the new Palestinian alliance which includes Hamas. He also urged the Palestinians to drop their claim to East Jerusalem.