WASHINGTON - Secretary of State Hillary Rodham Clinton called on Israelis and Palestinians to resume negotiations with a focus on their core disagreements with the aim of "real progress in the next few months."

"It is time to grapple with the core issues of this conflict on borders and security, settlements, water and refugees, and on Jerusalem itself," Clinton said in a speech Friday night, admitting to "deep frustrations" with the talks' progress.

Clinton said the United States would deepen its commitment to helping the Palestinian Authority build a state. She urged Arab countries to become more involved.

Clinton spoke at a Washington conference organized by the Brookings Institution's Saban Center for Middle East Policy. The audience included Israeli Defense Minister Ehud Barak, Palestinian Authority Prime Minister Salam Fayyad, and former British Prime Minister Tony Blair, the Middle East envoy for the so-called Quartet of Mideast mediators, which consists of the United States, the United Nations, Russia, and the European Union.

The secretary warned the two sides that they could not wait out their conflict and had to stop "demonizing" each other. As Israelis and Palestinians enter this phase of talks, Clinton said, the United States will offer proposals to bridge differences between the two groups "when appropriate."

Clinton made her first public remarks on the Mideast peace process since the administration decided earlier this week to stop pressuring Israel to renew a moratorium on West Bank settlement construction.

Palestinians have refused to return to talks without an extension of the freeze, which expired in September. Talks have been stalled since then.

Clinton said she had already begun to work on core issues in meetings with Palestinian and Israeli officials, including Fayyad and Barak. She consulted Friday with Palestinian negotiator Saeb Erakat. Thursday, she met with chief Israeli negotiator Yitzhak Molho.

In bringing the two sides together in September, she and President Obama said they aimed for a peace deal within a year - a goal that State Department spokesman P.J. Crowley said still holds.

"It is still intent to achieve a framework agreement on the core issues within a year," Crowley said Friday.

Failure to achieve an agreement threatens Israel, Clinton said. The tension between Israelis and Palestinians is a source of regional unrest and poses a threat to Israel's future as a democratic state, as the Arab birth rate outpaces that of Jews.

With military technology evolving, ensuring Israel's security will only grow more difficult, Clinton said. An agreement between Israelis and Palestinians would make it easier to reach a comprehensive regional peace, she said.

"The United States looks at these trends," Clinton said, "and we conclude without a shadow of a doubt that ending this conflict once and for all and achieving a comprehensive regional peace is imperative for safeguarding Israel's future."

Clinton said the sides must agree on a "single line drawn on a map that divides Israel from Palestine" and to permanent Palestinian borders with Israel, Jordan and Egypt.

She was less definitive on Palestinian refugees who want to return to homes they left in what is now Israel. The "difficult and emotional" issue needs a "just and permanent solution that meets the needs of both sides," she said.

Clinton said Israel settlements are "corrosive, not only to peace efforts and the two-state solution, but to Israel's future itself."

On Jerusalem, which Jews and Arabs both claim as a capital, Clinton urged the two sides to agree on an outcome that "safeguards its status for people around the world."