WASHINGTON - U.S. President Barack Obama, said Tuesday he saw encouraging signs of a softening of Israel's resistance to his call for a freeze on settlement-building in the occupied West Bank.

Earlier Tuesday, an Israeli government minister said no tenders had been issued for new housing projects in Israeli settlements since Prime Minister Benjamin Netanyahu's right-leaning government took office five months ago. Netanyahu has rebuffed Obama's push for a complete freeze, creating the most serious rift in U.S.-Israeli relations in a decade.

There has been movement in the right direction, Obama said when asked about the latest development after talks with Egyptian President Hosni Mubarak at the White House.

The two leaders, meeting for the third time in as many months, talked about how to jump-start the stalled Middle East peace process, a top foreign policy priority for Obama.

It was Mubarak's first visit to the United States since 2004. He had stayed away after falling out with former President George W. Bush over the latter's focus on promoting democracy in the Middle East and criticism of human rights in Egypt.

Mubarak's visit comes as the Obama administration has been pushing moderate Arab states to take steps that could encourage Israel to freeze settlement building on Palestinian territory.

Mubarak, however, said Arab states would only take a more active role in supporting the peace process once Israelis and Palestinians began direct negotiations.

Arab states have so far been cool to the idea of steps such as giving overflight rights to Israeli civilian aircraft and allowing Israel to open interest sections in foreign embassies in their capitals.

They have put the onus on Israel to revive the peace process, while Israel has said the Palestinians and Arab states must first do more to advance the peace process.

(Editing by Frances Kerry)

Egypt Israel George W. Bush Barack obama