President Bush welcomed Mahmoud Abbas (search), the democratically elected leader of the Palestinian people, to the White House on Thursday and commended the leader for agreeing that terror against Israelis must end in order to create a two-state solution in the Middle East.

"I believe the time has come for all parties to move beyond this (animosity) and work for the cause of peace," Bush said in a Rose Garden ceremony. "Mr. President, we will work with you to help realize the dream of a free and democratic Palestine.

"Palestinians voted against violence and for sovereignty because only the defeat of violence can (enable) sovereignty," Bush said, adding that terrorists are against a Palestinian state and "must be held to account."

Abbas is seen by White House officials as a leader they can work with, unlike the late Yasser Arafat. The last time the head of the Palestinian Authority was in the Oval Office was in January 2001, when Arafat saw former President Clinton just days before Bush took office and closed the White House to Arafat. Abbas first came to the White House to meet Bush in 2003, when he was Arafat's prime minister.

The Bush administration is channeling tens of millions in additional dollars directly to the Palestinian Authority (search), overcoming some opposition in Congress in hopes of boosting Abbas' political fortunes as his ruling Fatah (search) party goes to parliamentary elections in July against the terror group Hamas (search), which performed well in recent local elections.

Bush made several demands on Israel as Abbas stood by his side, saying all were necessary to allow the "road map" for Middle East peace to proceed. Among them, he said he wanted roadblocks removed and clear access lines between the West Bank (search) and Gaza Strip (search).

Abbas also called the security barrier that Israel is building to protect against terrorism a prison wall that is in violation of road map obligations.

"There is no justification for the wall and it is illegitimate as well as settlements — it is illegitimate and we should not allow," Abbas said.

"Time is becoming our greatest enemy. We must end the Palestinian-Israeli conflict before it is too late," he added.

Bush said the United States would help to reconstitute the Palestinian security forces and he announced that the United States would give $50 million to the Palestinians to help with housing and infrastructure projects in Gaza. The money would be timed to Israel's summer withdraw from the territory it captured from Egypt in 1967.

The money is part of a $150 million request Bush is requesting from Congress in addition to the $275 million it approved this year. The vast majority of U.S. aid to the Palestinians has been channeled through other groups, and just $40 million has gone directly to the authority over the past two years. The additional funds would go directly to the Palestinian Authority if approved by Congress.

In the Oval Office, Abbas showed Bush maps of Israel's continued expansion of Jewish settlements in the West Bank to demonstrate the threat it poses to Palestinians' hopes for a viable state. He also touted the reforms he has made in his government and security forces and the truce — albeit informal and shaky — he secured between militant groups and Israel.

However, the meeting is a delicate balancing act for Bush.

With Israel refusing to return to the negotiating table with the Palestinians until Abbas does more to reign in terrorist groups, Bush was pushing Abbas to tackle the tough job of dismantling all Palestinian terror groups.

Israel also has said it won't resume talks on the internationally backed road map peace plan until it completes its plan to withdraw settlements from the Gaza Strip and part of the West Bank.

Arye Mekel, the Israeli consul general to the United States, told FOX News that the parties are still at the pre-road map stage. He said Israel will also not negotiate on three sticking points. Israel will not agree to cut up the borders to pre-1967, when Jordan occupied the West Bank all the way to Jerusalem and Egypt held Gaza.

Abbas said he wants those lines to be redrawn.

"When we talk about two states, we are talking about a Palestinian state within the boundaries of 1967. That means those boundaries in our view should go back to the Palestinian people," Abbas said.

Mekel said one of those boundary demands will never be met.

"The prime minister explained very clear this week in America more than once and publicly that Jerusalem would remain the united capital of the Jewish people, undivided forever," Mekel said, referring to Israeli Prime Minister Ariel Sharon's (search) remarks to the American Israel Political Action Committee (search).

Mekel added that Israel will not give Palestinians the "right of return" to Israel, but can instead go to Palestinian areas when they are finalized.

Amid the latest developments, Bush has embarked on a fresh drive to invigorate the search for peace in the long-running Israeli-Palestinian dispute. Last month, Bush brought Sharon and Saudi Crown Prince Abdullah, to his Texas ranch. He said he will send Secretary of State Condoleezza Rice to Ramallah ahead of Israel's withdraw from the disputed territories.

Asked if Abbas was doing enough to stop terror, Bush responded that he knows Abbas is committed to democracy.

"Our position on Hamas is very clear, it's a well known position and it hasn't changed. Hamas is a terrorist group," Bush said, adding that he wants everyone to participate in elections but the party of peace is more likely to win over the party of violence.

"I don't think they are going to get elected because I think Palestinian moms want their kids to grow up in peace just like American moms want their kids to grow up in peace," Bush added.

Former deputy special Mideast coordinator Aaron Miller told FOX News that transparency in the use of aid will be essential for Abbas, who must also quell terror and make sure Gaza is a first step in the peace process not the last.

He added that support for Abbas over Hamas is critical.

"Either Hamas is going to deliver the goods to the Palestinian people or the Palestinian authority under the direction of Mahmoud Abbas is going to ... we have a fundamental stake here ... to make sure it's Abbas and not Hamas that delivers the goods," Miller said.

Earlier Thursday, Abbas met with a group of about two-dozen American Jews at his hotel, and restated his objections to violence as a tactic. But he did not respond directly when asked if he would order the dismantling of terror groups in Palestinian-held areas, said Martin Raffel of the Jewish Council for Public Affairs (search) in New York.

However, Abbas offered assurances that security would be concentrated under the Palestinian Authority and there will be a "transformation" once elections are held, Raffel said.

The Associated Press contributed to this report.