With US credibility and influence in the Middle East at stake, Obama wants to dissuade the Palestinians from asking the UN Security Council for statehood in defiance of Israeli objections and a US veto threat. But they have shown no sign of renouncing their plan to stake their claim on Friday.
A year after telling the UN General Assembly he hoped to see a Palestinian state born by now, the US president said creating such a state alongside Israel remained his goal.
"But the question isn't the goal we seek — the question is how to reach it. And I am convinced that there is no short cut to the end of a conflict that has endured for decades," Obama said.
"Peace will not come through statements and resolutions at the UN — if it were that easy, it would have been accomplished by now," he said.
"Ultimately, it is Israelis and Palestinians who must live side by side. Ultimately, it is Israelis and Palestinians — not us — who must reach agreement on the issues that divide them: on borders and security; on refugees and Jerusalem," he added.
However, it is the failure of 20 years of US-brokered negotiations that has driven Palestinian President Mahmoud Abbas to take his quest for statehood to the United Nations — a move that threatens to embarrass the United States by forcing it to protect its Israeli ally against the tide of world opinion.
And although Obama said he had set out a new basis for negotiations in May, chances of reviving peace talks look bleak.
The two sides are far apart. The Palestinians are divided internally and Obama will not want to risk alienating Israel's powerful US support base by pressing for Israeli concessions as he enters a tough re-election battle next year.
Obama's speech infuriated Palestinians. Yasser Abed Rabbo, a senior Palestinian official, said Obama's remarks showed an inconsistent approach in praising Arab struggles for freedom, while making an "abstract call" for negotiations between Israelis and Palestinians.
"We expected to hear that the freedom of the Palestinian people was the key to the Arab spring," he said.
Obama later met Israeli Prime Minister Benjamin Netanyahu and assured him that efforts to impose peace on Israel and the Palestinians would not work.
"I want to thank you, Mr. President, for standing with Israel and supporting peace," a beaming Netanyahu said as the two men met with a backdrop of US and Israeli flags on the sidelines of the UN General Assembly session.
Referring to Obama's vow to veto a Palestinian recognition appeal, possibly in the UN Security Council, Netanyahu said: "I think this is a badge of honor and I want to thank you for wearing that badge of honor."
Netanyahu hoped that despite intense political pressure, other world leaders would follow Obama and oppose any attempt by the Palestinians to raise the statehood issue in the Security Council.
The atmosphere in the meeting, in which Obama and Netanyahu sat side by side behind a boardroom-style conference table, was much warmer than in some of their past talks, notably a testy Oval Office encounter in May.
Obama was also due to meet Abbas and appeal to him not to present UN Secretary General Ban Ki-moon with a membership application on Friday, setting the stage for an eventual Security Council vote that Washington says it will block.
In one of several frantic efforts to avert a diplomatic disaster, French President Nicolas Sarkozy proposed that the United Nations give the Palestinians status as a UN observer state while setting out a road map for peace within one year.
Sarkozy warned that any veto against Palestinian efforts to seek full statehood in the Security Council "risked engendering a cycle of violence" in the Middle East."
"We can no longer wait ... Let us cease our endless debates on the parameters and begin negotiations," he said. "The moment has come to build peace for Palestinian and Israeli children."
The United States, Russia, the European Union and the United Nations — the "Quartet" of Middle East mediators — are seeking a compromise, with no signs yet of success.
The Security Council could also delay action on Abbas' request for weeks, giving the Quartet more time to come up with a statement that could coax both sides back to the table.
The Palestinians said they will give the Security Council "some time" to study their application. "We will give some time to the Security Council to consider first our full membership request before heading to the General Assembly," Nabil Shaath, a senior official in Abbas' Fatah party, told reporters.
