The US still believes a peace deal between Israelis and Palestinians is possible by the year's end, Secretary of State Condoleezza Rice has said, reported BBC.
But during a visit to the region, she described Israeli settlement activity in the West Bank as "problematic".
Israeli Foreign Minister Tzipi Livni insisted that Israel would fulfil its peace process obligations, and that no new settlements were being built.
US President George W Bush is seeking a deal by the end of his term in January.
Ms Rice's visit is laying the ground for President Bush's trip to the region later this month.
The current peace process, launched at a Middle East conference hosted by Mr Bush in November, has been dogged by a lack of progress.