United States Secretary of State Hillary Clinton said on Wednesday that Israelis and Palestinians have not abandoned peace negotiations and that a two-state solution was still possible.

Clinton spoke at an annual gala of the American Taskforce for Palestine at in Washington, DC.

"We remain convinced that if they persevere with negotiations, the parties can agree on an outcome that ends the conflict; reconciles the Palestinian goal of an independent and viable state based on the 1967 lines, with agreed swaps."

"We have a moment in time and we must seize... The Obama administration will not turn their backs on either the people of Palestine and Israel. They will continue working for and god willing achieving peace," said Clinton.

Clinton also spoke about U.S. efforts to ease situation in the Gaza strip, under Israeli blockade since 2007. "Our goal is to support sustainable economic growth in Gaza, and it’s a little-known fact that the Palestinian Authority is the principal financial supporter of Gaza. The people in Gaza are dependent upon the Palestinian Authority, which is another reason why the increase in economic activity in the West Bank is not only good for those who live in the West Bank, but those who live in Gaza as well."

Clinton referred to the issue of settlement building in the West Bank, and said that U.S. position on settlements "is well known and has not changed."

Under international pressure, Israel in late 2009 declared a 10-month freeze on settlement building in the West Bank, excluding East Jerusalem. But on September 26, less than a month after talks kicked off in Washington, the settlement moratorium expired, despite Palestinian threats to walk out of talks if building resumes.

Since then, the Israeli government approved tenders for a total of 238 new housing units in Jewish settlements in East Jerusalem, despite calls for Israel to maintain the freeze on construction of new houses in order to keep negotiations alive.

U.S. State Department spokesman Philip Crowley last week criticized Israel for its decision to resume building in East Jerusalem.

"We were disappointed by the announcement of new tenders in East Jerusalem yesterday. It is contrary to our efforts to resume direct negotiations between the parties," said Crowley.