Israeli and Palestinian leaders will meet in Jerusalem on Thursday to try to resolve a crisis over disputed land that has paralyzed recently renewed peace negotiations, officials said Wednesday.

The meeting between Palestinian President Mahmoud Abbas and Israeli Prime Minister Ehud Olmert will be their first since talks resumed earlier this month after seven years of violence. It comes just two weeks before U.S. President George W. Bush visits the region for the first time in his tenure, in an effort to build on momentum from a recent Mideast peace summit.

The return to the negotiating table was officially announced at that summit in the United States last month, hosted by Bush as part of his efforts to get the sides to sign a deal before he leaves office in January 2009.

Palestinians have conditioned progress in the negotiations on Israel's canceling its plan to build 307 homes in the east Jerusalem neighborhood of Har Homa. The expansion plan was announced immediately after the summit, and just days before negotiations officially began on Dec. 12.

Israel insists the expansion does not violate its commitment not to build in West Bank settlements because the neighborhood is located in east Jerusalem, which Israel captured in the 1967 Mideast war and later annexed.

The international community has not recognized Israel's hold on that sector of the city, where Palestinians want to establish the capital of a future state.

Abbas and Olmert will meet Thursday in an effort to resolve the issue, Palestinian negotiator Saeb Erekat said Wednesday. Officials in Olmert's office confirmed the meeting.

Har Homa will be a top issue on the agenda, Erekat said.

"We want to make 2009 a year of peace," Erekat said. "This (settlement expansion) kills the credibility of the peace process."

The Palestinians want Israel to declare a cessation of all settlement expansion in the war-won territories of the West Bank and east Jerusalem, Palestinian officials said on condition of anonymity due to the sensitive diplomatic nature of the talks.

Peace talks resumed after the moderate Abbas kicked the Islamic Hamas group out of the Palestinian government following its violent seizure of the Gaza Strip in June. Since the takeover, Abbas in effect controls only the West Bank.

But Hamas' control of Gaza, located at Israel's southwestern flank, threatens to complicate the peace efforts. Hamas forces have refused to stop militants from firing rockets into southern Israel almost daily. The projectiles wreak havoc in the area and have killed 12 people in the past six years.

Hamas leader Ismail Haniyeh had suggested earlier this week that he would be willing to stop the rocket fire if Israel ceases military operations against Gaza militants. Israeli defense officials had said they were reviewing the proposal but Olmert's office insisted Israel would not consider a cease-fire with the militant group.

Israel refuses to deal with Hamas, which has killed hundreds of Israelis in suicide bombings and refuses to recognize the Jewish state.

The possibility of a Hamas-Israel truce was expected to be on the agenda of a meeting later Wednesday between Israeli Defense Minister Ehud Barak and Egyptian President Hosni Mubarak. Egypt, a regional powerhouse, has mediated Israel-Hamas contacts in the past.

Israel also hoped Barak could in his visit get Egypt to crack down on weapons smuggling into Gaza, which has greatly increased since the Hamas takeover.

Israeli Foreign Minister Tzipi Livni infuriated Cairo earlier this week by accusing its forces of doing a "terrible" job in securing the border, saying this stands in the way of Israel's negotiations with the Palestinians because it strengthens Gaza extremists.

In a statement, the Egyptian government said Livni did not really know what was going on at the border and accused her of overstepping her role.

Israel is concerned that Hamas is using subterranean tunnels under the Egypt-Gaza border to amass ammunition and explosives to brace for an intensified round of fighting. The Israeli military believes hundreds of tons of explosives have been smuggled into Gaza through the tunnels.