Israeli Prime Minister Benjamin Netanyahu Wednesday evening announced a 10-month freeze on construction in Jewish settlements in the West Bank, saying the move was in an effort to revive the peace talks with the Palestinians.

"I hope that this decision will help launch meaningful negotiations to reach a historic peace agreement that would finally end the conflict between Israel and the Palestinians," Netanyahu said at a special press conference in his Jerusalem office.

"We have been told by many of our friends that once Israel takes the first meaningful steps toward peace, the Palestinians and Arab states would respond," he said.

Settlement construction has been a key sticking point in US efforts to restart the stalled Israeli-Palestinian peace talks, which have been suspended since Israeli army's Operation Cast Lead last winter in the Hamas-controlled Gaza Strip.

Israel began building in the West Bank in 1967, following the capture of the territory from Jordan during the Six-Day War. Some 300,000 Israelis currently live in the West Bank, in addition to about 180,000 people living in Jewish neighborhoods in East Jerusalem.

The Palestinians have refused to engage in peace talks until Israel freezes settlement construction in the West Bank and East Jerusalem, which the Palestinians want as the capital of a state.

However, Netanyahu said at the press conference that the construction freeze would not be implemented in predominantly Arab East Jerusalem, which is viewed by Israel as a separate issue to be discussed in a final status agreement with the Palestinians.

"We do not put any restrictions on building in our sovereign capital," said the premier.

The freeze in the West Bank settlements applies only to new homes, meaning that housing already underway will continue.

"We will not halt existing construction and we will continue to build synagogues, schools, kindergartens and public buildings essential for normal life in the settlements," he said.

Netanyahu called on the Palestinians to enter into a new round of peace talks.

"Now is the time to begin negotiations, now is the time to move forward towards peace," he said. "Israel today has taken a far-reaching step toward peace, it is time for the Palestinians to do the same."

Netanyahu's announcement came shortly after Israeli security cabinet approved the 10-month freeze on construction in the West Bank settlements.

Eleven security cabinet members voted in favor of the settlement freeze, with only National Infrastructure Minister Uzi Landau from Yisrael Beiteinu (Israel is our home) opposing it, according to local daily The Jerusalem Post.

The settlement freeze plan will go to the full cabinet on Sunday for final approval, said the newspaper.

Shortly before Wednesday's security cabinet session, Netanyahu said the freeze would prove that Israel genuinely seeks to reach peace with the Palestinians.

Israeli Defense Minister Ehud Barak, a key security cabinet member, came out in favor of Netanyahu's proposal.

"Its aim is to open a window for renewing negotiations with the Palestinians," Barak was quoted by local daily Ha'aretz as saying.

The Palestinian National Authority (PNA) strongly rejected Netanyahu's plan and reiterated its refusal to return to the negotiating table with Israel.

Nabil Abu Rudaineh, a spokesman for PNA President Mahmoud Abbas, announced that the Palestinians rejected the plan because it did not include Jerusalem.

"For the Palestinians and Arabs, Jerusalem is a red line that can't be crossed," Abu Rudaineh was quoted by The Jerusalem Post as saying. "We can't accept any settlement construction freeze that does not include Jerusalem."

Chief PNA negotiator Saeb Erekat also dismissed Netanyahu's plan as fraudulent, saying that "This is not a complete freeze of settlement construction because Israel will continue to build 3,000 housing units in the West Bank and won't stop the work in Jerusalem."

Both Abu Rudaineh and Erekat are accompanying Abbas on a tour of several Latin American countries, including Brazil, Argentina and Chile.