Prime Minister Ehud Olmert told parliament on Monday that he would devote the coming year to pursuing peace with the Palestinians, saying the current Palestinian leadership is serious about reaching a deal.

In a speech frequently interrupted by catcalls from opposition lawmakers, Olmert said the time is past for making excuses not to talk to the Palestinians, and the goodwill of Palestinian President Mahmoud Abbas and his West-leaning government must not be squandered.

"We need once and for all to stop the vicious cycle," Olmert said, "so that we might not once again have to tell ourselves how shortsighted we were not to have seized this sliver of opportunity that might have presented itself."

Olmert said that in his recent meetings with Abbas, nothing had been agreed or promised by either side, but a mutual atmosphere of trust and willingness to listen had been established.

"I believe that they want to move ahead together with us on a route that will bring about a change in the reality of relations between us and them," he added, referring to Abbas and Palestinian prime Minister Salam Fayyad.

Olmert acknowledged that there was a gulf between Abbas' and Fayyad's good intentions and their ability to get their people behind a peace agreement. Palestinians have recently been saying exactly the same about the Israeli leadership.

Nevertheless, he added, his government was obligated to seek an end to the dispute.

"I want to serve notice here, in the most resolute way possible, that I do not intend to look for excuses to block peace efforts," Olmert said.

In his speech, at the opening of parliament's winter session, Olmert said Israel would have to give up some of its deepest desires — an apparent reference to vacating Israeli settlements in the West Bank — and added that the Palestinians "will have to deal with the need to concede part of their dreams in order to build with us a realistic, if not ideal, if not perfect" future of peace and security.

As Olmert spoke, opposition lawmakers shouted for him to declare whether or not he intends to cede to the Palestinians sovereignty over parts of east Jerusalem, which they claim as the capital of a future Palestinian state.

Earlier Monday, Olmert confidant Haim Ramon said the government was prepared to divide the disputed city, signaling a dramatic shift in Israeli thinking on one of the most sensitive issues in the conflict with the Palestinians.

Hard-line Israeli lawmakers, and much of the public, oppose any division of Jerusalem, which is home to Jewish, Christian and Muslim holy sites.

Past peace talks have broken down over the fate of Jerusalem, and former Prime Minister Ehud Barak was harshly criticized when he considered sharing the city during failed negotiations in 2001.

Following Olmert to the podium, opposition leader Benjamin Netanyahu said giving Palestinians control over east Jerusalem would pose a deadly threat to the Jews living in the western part of the city.

"Handing over holy sites from Israeli control will not bring peace but the opposite," Netanyahu said. "If Israel leaves it will open the door to al-Qaida."

Since Israel captured the eastern part of the city from Jordan in the 1967 Mideast war, successive Israeli governments of all political leanings have declared the city the "eternal and indivisible" capital of the Jewish state.

Palestinian negotiator Saeb Erekat said Olmert's comments emphasized the need to move quickly.

"Everyone, including Mr. Olmert, realizes that time is of the essence, and that it's time for decisions," he said.

As Olmert spoke Monday, Israeli and Palestinian negotiating teams were meeting to begin work on a joint document, which they hope to present at a U.S.-hosted Mideast peace conference in November.

The sides hope the document will outline a joint vision of a future peace deal. Olmert said the November meeting was meant to compliment direct Israeli-Palestinian negotiations, not replace them.