Prime Minister Benjamin Netanyahu said Tuesday that Israel "will be generous" in giving back land to establish a Palestinian state, but will not return to the 1967 borders and will not agree to a divided Jerusalem.
Netanyahu, in an address before a joint meeting of Congress, outlined his terms for peace following a dispute with President Obama over the boundaries of a future Palestinian state. Obama last week called for a two-state solution based on Israel's borders before the 1967 Six Day War. Netanyahu, along with pro-Israel members of Congress, said those lines would endanger the security of Israel -- a claim the prime minister repeated Tuesday.
"Israel will not return to the indefensible boundaries of 1967," he said. "Israel will be generous on the size of the Palestinian state, but we'll be very firm on where we put the border with it."
"Peace must be anchored in security," Netanyahu said.
The two leaders, though, have sought to dial back tensions following their meeting in Washington last week. Obama stressed that he has not called for a return to the exact borders Israel held before capturing east Jerusalem, the West Bank and Gaza Strip in June 1967. He, like the Palestinians, is open to land swaps so Israel can hold on to settlements it built after the 1967 war.
Netanyahu acknowledged this finer detail, saying he agrees with Obama that the final border "will be different" from the 1967 lines. He stressed that he wants to achieve a vital peace deal and said he is "willing to make painful compromises." While some settlements would be incorporated into the final borders, he said, "some settlements will end up beyond Israel's borders."
Netanyahu tried to place the ball in Palestinian leader Mahmoud Abbas' court, calling on him to do two things -- publicly endorse the concept of a "Jewish state" alongside a Palestinian one, and "tear up your pact with Hamas." He also said a Palestinian state should be "fully demilitarized" and Israel must be able to maintain a military presence along the Jordan River.
Netanyahu said he would be prepared to pursue a "far-reaching compromise" and welcome a Palestinian state into the United Nations.
The Israeli leader meanwhile sought to assure U.S. lawmakers Tuesday that the bond between their countries is as strong as ever.
"Israel has no better friend than America, and America has no better friend than Israel," Netanyahu said. He called his nation America's "unwavering ally," and said his people "will always be pro-American." He reminded U.S. lawmakers that, amid the tumult in the Middle East, Israeli is the "one anchor of stability."
The prime minister began his address by congratulating the U.S. on killing Al Qaeda leader Usama bin Laden. "Congratulations, America. Congratulations, Mr. President. You got bin Laden. Good riddance," he said. Netanyahu was interrupted many times by applause and standing ovations throughout his address.
Israel, which enjoys strong bipartisan backing in Congress, had been rattled by Obama's Israel comments last week. Obama has not, however, offered proposals for how to return the two sides to the bargaining table. Palestinians are refusing to come back as long as Israeli settlement construction continues.
In a sign of the sympathy Netanyahu enjoys in Congress, Obama's own political ally, Senate Majority Leader Harry Reid, challenged Obama on the border issue at the pro-Israel lobby AIPAC dinner.
"No one should set premature parameters about borders, about building or about anything else," Reid said. The reference to building alluded to earlier U.S. demands that Israel renew an expired moratorium on settlement construction.
Netanyahu's address to Congress marked the first time he has laid out a blueprint for peacemaking.
In a statement to Fox News, the Palestinian Authority on Tuesday accused Netanyahu of "setting preconditions before starting negotiations." They said the 1967 lines are the only basis on which to re-launch peace talks and that East Jerusalem should be the capital of a future Palestinian state.
"After the speech, the Palestinians are determined more than ever to go to the U.N. and call for international recognition of a Palestinian state based on the 1967 borders," the PA said, referring to a U.N. statehood push opposed by Netanyahu and Obama.
The Palestinians have embraced Obama's support for the 1967 lines as the basis of the final borders between Israel and a future Palestine, but largely ignored Obama's other key proposals.
Among them: his opposition to their plan to ask the U.N. to recognize their independence; his criticism of a Palestinian power-sharing deal that would bring the Hamas militant group into the government; and his calls that Israel be formally recognized as the homeland of the Jewish people. Acceptance of the "Jewish state" is seen as a rejection of the demands of Palestinian refugees to return to lost properties in what is now Israel.
Abbas is to consult with leaders of his Fatah movement as well as the Fatah-dominated umbrella group, the Palestine Liberation Organization, on Wednesday to consider his next move.
Obama has said Israel should not be expected to negotiate with a government that does not recognize its right to exist.
The Associated Press contributed to this report.