Israel - Prime Minister Benjamin Netanyahu said on Thursday Israel hoped to forge peace with the Palestinians, but sidestepped a controversy over Jewish settlement that has stalled a resumption of negotiations.

Netanyahu was speaking at a reception outside Tel Aviv days before U.S. President Barack Obama's peace envoy, George Mitchell, is expected in the region for new talks about how to renew peace efforts.

We hope in the months and years ahead to forge peace with the Palestinians and to expand that into a vision of a broader regional peace, he said.

Western-backed Palestinian President Mahmoud Abbas has demanded Israel halt construction in Jewish settlements before the talks, which stalled some months ago, can resume.

Nabil Abu Rdainah, an aide to Abbas, reacted to Netanyahu's comments by saying the Palestinians were ready to resume talks immediately on a two-state solution based on an Israeli pullout from land captured in 1967, including East Jerusalem.

If Israel met these terms, including a halt to settlement construction, the road to peacemaking will be open, Rdainah said.

Netanyahu, a right-wing leader in office since March, has so far rejected U.S. and European demands to halt settlement building in the occupied West Bank.

Egypt was the first Arab country to sign a peace treaty with Israel in 1979, and was followed in 1994 by Jordan.

(Writing by Allyn Fisher-Ilan; Editing by Kevin Liffey)

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