CAIRO - President Barack Obama called for a new beginning in relations between the United States and the Muslim world Thursday, addressing grievances over the Arab-Israeli conflict, two U.S.-led wars and tensions over Iran.

Speaking to the world's more than 1 billion Muslims from Cairo, Obama pledged to pursue Palestinian statehood, said U.S. troops did not want to stay in Iraq or Afghanistan forever and offered mutual respect in dealings with long-time foe, Tehran.

His keynote speech, occasionally interrupted by shouts of we love you, was welcomed by some for its fresh tone after George W. Bush's departure even as others expressed frustration that he did not outline specific steps to change U.S. policy.

We meet at a time of tension between the United States and Muslims around the world -- tension rooted in historical forces that go beyond any current policy debate, Obama said in the address that included quoting Islam's holy book, the Koran.

I have come here to seek a new beginning between the United States and Muslims around the world, one based upon mutual interest and mutual respect, he said. America and Islam are not exclusive, and need not be in competition.

This cycle of suspicion and discord must end, he added.

Highlighting hostility the U.S. leader faces from some quarters, al Qaeda leader Osama bin Laden, in a message on a website, warned Muslims against alliance with Christians and Jews, saying it would annul their faith.

It was the second communication from the al Qaeda leader in as many days aimed at upstaging Obama's speech.

The supreme leader of Washington's regional arch foe, Iran's Ayatollah Ali Khamenei, said in an speech before Obama spoke that America was deeply hated and only action, not slogans, could change that.

The choice of Cairo for the speech underscored Obama's focus on the Middle East, where he faces big foreign policy challenges, from trying to restart Israeli-Palestinian peace talks to curbing Iran's nuclear plans that Washington says is to build atomic bombs. Tehran denies any such aims.

PATIENCE

Although the administration tried to lower expectations in recent days about what would be accomplished by the speech, there were high hopes in the region that he would take a tougher line on Israel and follow up his words with actions.

He also offered little specific on democracy, the rule of law and human rights in the Arab world, issues that many in the region had hoped to hear him address.

Obama, who wants to build a coalition of Muslim governments to back his diplomatic moves, affirmed his commitment to a two-state solution to the Israeli-Palestinian conflict.

That is in Israel's interest, Palestine's interest, America's interest, and the world's interest, he said. That is why I intend to personally pursue this outcome with all the patience that the task requires.

He said Palestinians had to abandon violence and urged them to acknowledge Israel's right to exist. He also said Israel should stop building settlements in the West Bank.

President Obama's speech is a good start and an important step toward a new American policy, Palestinian official Nabil Abu Rdainah said.

Obama said Iran should have access to peaceful atomic power, but it must adhere to nuclear non-proliferation.

This is not simply about America's interests. It is about preventing a nuclear arms race in the Middle East that could lead this region and the world down a hugely dangerous path.

Obama said the United States had no interest in keeping military bases in Afghanistan and said Washington had a responsibility to leave Iraq to Iraqis and build a better future for them.

This speech was very inspiring and I think many people will welcome it, because he tried to be neutral and honest and objective, said Khalil al-Anani, political analyst at Egypt's al-Ahram Foundation.

But other reaction was mixed. The Islamic world does not need moral or political sermons. It needs a fundamental change in American policy, said Hassan Fadlallah, a lawmaker for Lebanon's Hezbollah.

Mohamed Habib, deputy leader of Egypt's Muslim Brotherhood, said: It's a public relations address more than anything else.

(Additional by Reuters bureaus; Writing by David Alexander and Edmund Blair; Editing by Samia Nakhoul)

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