NEW YORK (CNN)  -- Prodding Israel and the Palestinian Authority to restart talks aimed at a permanent resolution of their decades-old conflict, President  Obama dropped a demand for an Israeli settlement freeze, U.S., Israeli and Palestinian officials said.



Benjamin Netanyahu, left, President Obama and Mahmoud Abbas.



"Simply put, it is past time to talk about starting negotiations. It is time to move forward," Obama told reporters before a meeting with Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu.



"It is time to show the flexibility and common sense and sense of compromise that is necessary to achieve our goals," Obama said.



Obama first met separately with Netanyahu  and Abbas on the sidelines of the U.N. General Assembly in what he called "frank and productive" talks. The session was the first among the three leaders since Obama took office in January.



George Mitchell, Obama's envoy for the Middle East, attended Tuesday's talks. He said the talks were "at all times cordial," but "direct" and sometimes "blunt."



Obama told Abbas and Netanyahu that, "The only reason to hold public office is to get things done," and that everyone "must take risks for peace," Mitchell said.



Mitchell told reporters the U.S. is "not identifying any issue as being a precondition or an impediment to negotiation."



But the United States and Israel have publicly disagreed on Israeli plans to build more housing on land the Palestinians regard as theirs. Previous Obama administration demands for a freeze have been ignored by the Netanyahu government.  Watch Netanyahu address peace, settlements »



Abbas has so far rejected resuming talks with Israel until the Jewish state halts all settlement building in the occupied West Bank and in predominantly Palestinian East Jerusalem. Arab states also have balked at the U.S. request to take confidence-building measures toward Israel until Israel freezes settlement construction.



Sitting with Netanyahu and Abbas, Obama softened his regular language on a settlement "freeze," saying that Israel has had meaningful discussions about "restraining" settlement activity.



"But they need to translate these discussions into real action on this and other issues," he said.



"Obama told Abbas that he couldn't get the settlement freeze and promised to keep trying, but that it shouldn't be a condition for talks and it was time to move on," one Palestinian aide to Abbas said.



Several U.S. officials said that Obama told Abbas that although the U.S. believe a settlement freeze would create a better atmosphere for talks to begin, the lack of one should not be used an as excuse not to talk.



"Let's not have the perfect be the enemy of the good," Obama told Abbas, according to the officials.  Watch Obama: 'We have to find a way forward' »



"It's been apparent for some time that the Israelis were going to fall short of what is necessary on the settlement freeze," one senior U.S. official said. "But our view is let's get to negotiations and settlements will be addressed within those final status issues"



A senior Israeli diplomat said Israel agreed to not building any new settlements, no outward expansion of existing growth and to only build for "natural" growth within existing settlements. He said Israel also agreed not to encourage Israelis to move to settlements, which would increase the population.



"A complete settlement freeze wasn't physically or politically possible, especially in the absence of any Arab or Palestinian concessions," the Israeli diplomat said. "There was a time the gaps had significantly narrowed, but now they were starting to widen. The administration recognized, rather than have them widen further, we should start negotiating."



The Palestinian aide to  Abbas said Obama's failure to secure a settlement freeze has weakened him in the eyes of the Palestinian delegation, because it casts doubt on his ability to move Israel during final status negotiations.



The Palestinians did win an important point, however, with Obama making clear that the peace talks would not start from scratch, which Netanyahu had favored
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