U.S. President Barack Obama urged Israeli and Palestinian leaders on Wednesday not to let the chance for peace slip away as he opened a U.S.-sponsored summit to relaunch direct talks shadowed by Middle East violence.

But in the wake of a second West Bank shooting attack against Israelis in as many days and a persistent deadlock over settlements, Obama acknowledged skepticism "in some quarters" about his prospects for succeeding where so many U.S. leaders have failed and said he was under no illusions about the challenges ahead.

Wading into hands-on peacemaking on the eve of restarting face-to-face negotiations after a 20-month hiatus, Obama brought both sides together for ceremonial handshakes at the White House and a commitment to try to forge within a year a deal on Palestinian statehood.

"As I told each of them today, this moment of opportunity may not soon come again. They cannot afford to let it slip away," Obama said after one-on-one talks with Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas.

Speaking ahead of a working dinner at the White House, Netanyahu said Wednesday that he had come to the Washington peace summit that "to figure out a historic compromise" with the Palestinians.

The dinner included Palestinian President Mahmoud Abbas, Egyptian President Hosni Mubarak, Jordanian King Abdullah II, the Quartet's envoy to the Middle East Tony Blair, U.S. Secretary of State Hillary Clinton and Netanyahu.

Netanyahu mentioned the attacks of the last days, using them to highlight the importance of Israel's security needs. Netanyahu said that Israel would not allow terrorists to block the path to Middle East peace. Any peace deal, he declared, must be one that guarantees security.

"Peace does not sit well with the idea that you drive down a road and a firing squad guns you down," Netanyahu was quoted as having told Obama during their two-hour meeting.

The prime minister spoke of the need for a "historic compromise."

"The Jewish people are no strangers in our homeland, the land of our forefathers," he said. "But we recognize that another people share this land with us. And I came here today to find a historic compromise that will enable both peoples to live in peace, security and dignity," Netanyahu said.

Addressing Abbas directly, the prime minister said that "If we work together, we can take advantage of the great benefits afforded by our unique place under the sun. Our geography, history, culture, climate and the talents of our peoples can create unprecedented opportunities in tourism, trade, industry, energy, water and so much more."

Peace "must also be defended against its enemies," Netanyahu said. "We want the skyline of the West Bank to be dominated by apartment towers, not missiles. We want the roads of the West Bank to flow with commerce, not terrorists. We left Lebanon, we got terror. We left Gaza, we got terror. We want to ensure that territory we concede will not be turned into a third Iranian sponsored terror enclave aimed at the heart of Israel."

"President Abbas, we cannot erase the past," Netanyahu said. "But it is within our power to change the future. Thousands of years ago, on the very hills where Israelis and Palestinians live today, the Jewish prophet Isaiah and the other prophets of my people envisioned a lasting peace for all mankind."

"Let today be a first step, however small, in our joint effort to realize that vision," he said.

Egypt's Mubarak also addressed the White House ahead of the joint dinner. Speaking in Arabic with a simultaneous translator, Mubarak called on Israel to freeze settlement activity and "seize the opportunity" for peace.

Mubarak called Israeli settlement-building in Palestinian territories contrary to international law, adding that failure to achieve peace between Israel and the Palestinians has generated great frustration among the populace of the region.

Abbas also addressed the White House, condemning the latest spate of violence against Israelis in the West Bank. He pledged to "spare no effort" to reach a peace agreement with the Israelis.

"We do not want at all that any blood be shed," Abbas said, adding that a comprehensive peace should correct historical injustices.

Abbas reiterated the Palestinian demand for a freeze on all Israeli settlements construction on land the Palestinians seek for a future state, including East Jerusalem.

Jordan's king, who also spoke, called on the Israelis and Palestinians to move quickly to address the most difficult obstacles in achieving a final peace settlement.

Abdullah warned that the negotiations must produce results.

"Time is not on our side," he said, adding that achieving a deal within the one-year goal would require "sparing no effort in addressing all final status issues."

Obama maintained that final status issues must be on the table, including establishing borders of a Palestinian state, the Palestinian demands for the right of Arab refugees to return to Israel, and the future of Jerusalem and Israeli settlements.