NEW YORK - President Barack Obama will broker his first summit of Israeli and Palestinian leaders on Tuesday but is given little chance of achieving a breakthrough toward relaunching long-stalled peace talks.

Obama will make his most direct foray into Middle East diplomacy when he brings together Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas in New York a day before making his U.N. General Assembly debut.

With the two sides entrenched in their positions, the meeting -- the first between Netanyahu and Abbas -- could yield just a three-way handshake instead of the diplomatic coup White House aides had once hoped for.

All parties have sought to lower expectations about the results.

We have no grand expectations out of one meeting except to continue ... the hard work, day-to-day diplomacy that has to be done to seek a lasting peace, said White House spokesman Robert Gibbs.

Obama's best prospect for salvaging something more than symbolism from the talks is if he can find a way to narrow the gap between Israel and the Palestinians or wring out even modest good-faith concessions.

Hopes that this would be a breakthrough summit dimmed after George Mitchell, Obama's Middle East envoy, left the region on Friday without reaching a deal with Israel over limits on Jewish settlements in the occupied West Bank.

Each side has blamed the other for the failure of Mitchell's mission.

LITTLE TANGIBLE PROGRESS

Despite that, there has been little tangible progress since Obama set Middle East peace as a top priority at the start of his presidency in January, drawing a contrast to his predecessor George W. Bush, who was criticized internationally for neglecting the long-running conflict.

A reactivated U.S. role in Israeli-Palestinian peacemaking is also seen as a major part of Obama's effort to repair America's image in the Muslim world.

However, his administration has made little headway in clearing obstacles to negotiations on an agreement to create a Palestinian state in the West Bank and Gaza Strip and resolve disputes over the future of Jerusalem and Palestinian refugees.

Relations between Washington and its close ally Israel are facing the worst strains in a decade with Netanyahu's right-leaning government resisting U.S. pressure to halt settlement expansion.

Netanyahu, whose coalition has a strong pro-settler wing, has rejected a total cessation of building within settlements, saying the natural growth of settler families must be accommodated. Washington has explicitly rejected that argument.

Netanyahu offered Mitchell a nine-month freeze in settlement building in the West Bank, Israeli officials said, adding that the envoy was pressing for a one-year suspension.

Abbas is demanding an open-ended settlement freeze that also includes East Jerusalem, which Israel captured along with the West Bank in a 1967 war.
Echoing Palestinian officials who say Tuesday's meeting during the U.N. General Assembly does not mean a return to a negotiating process that was suspended in December, Netanyahu ally Benny Begin said: The summit will not mark a start to negotiations.

(Additional reporting by Jerusalem bureau; editing by Chris Wilson)

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