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A speech in which Prime Minister Benjamin Netanyahu declared support for limited Palestinian statehood created new obstacles to peace, former United States president Jimmy Carter told Israeli lawmakers on Monday.

"In my opinion, Netanyahu brought up several obstacles to peace in his speech that others before him have not placed," Carter told the Knesset Foreign Affairs and Defense Committee.

"He insists on settlement expansion, demands that the Palestinians recognize Israel as a Jewish state even though 20% of Israel's citizens are not Jews," the former US president said.

The White House on Sunday hailed Prime Minister Benjamin Netanyahu's speech at Bar-Ilan University, in which he endorsed a limited Palestinian state, calling the speech 'an important step forward.'

(Click here for the full text of Netanyahu's speech.)

"The President welcomes the important step forward in Prime Minister Netanyahu's speech. The President is committed to two states, a Jewish state of Israel and an independent Palestine, in the historic homeland of both peoples," said White House Press Secretary Robert Gibbs.

He said Obama believes this solution can and must ensure both Israel's security and the fulfillment of the Palestinians' aspirations for a viable state, and that the U.S. leader welcomes Netanyahu's endorsement of that goal.

"The President will continue working with all parties - Israel, the Palestinian Authority, Arab states, and our Quartet partners - to see that they fulfill their obligations and responsibilities necessary to achieve a two-state solution to the Israeli-Palestinian conflict and a comprehensive regional peace," Gibbs added.

The presidency of the European Union praised Netanyahu's address in similar terms on Monday, calling it 'a step in the right direction.'

"In my view, this is a step in the right direction. The acceptance of a Palestinian state was present there," Czech Foreign Minister Jan Kohout, whose country currently holds the EU's six-month presidency, told reporters.

Netanyahu's policy address at Bar Ilan University on Sunday came in the wake of tremendous pressure from Obama to back the establishment of a Palestinian state and declare a freeze on West Bank settlement construction.

Though the speech was highly anticipated in light of U.S. pressure, expectations of its content were subdued.

At the time of the speech, Haaretz learned, Obama was playing golf.

The Anti Defamation League said the most significant aspect of Netanyahu's speech was his discussion of how a future Palestinian state might look. In his endorsement, Netanyahu said that he would accept the creation of such a state only if the international community could guarantee that it remain demilitarized.

"Prime Minister Benjamin Netanyahu's addressing the issue of a Palestinian state in his speech today was significant in his statement that the focus of talks should not be on whether there should be a Palestinian state but what kind of a state it should be," ADL National Director Abraham H. Foxman said in a statement.

"His willingness to talk about a Palestinian state as long as it is based on Palestinian acceptance of the Jewish state and is demilitarized and no threat to Israel should now provide the framework for moving the peace process forward and for easing potential tensions between the U.S. and Israel," said Foxman.

"We urge the U.S. and Israel to avoid discussing these matters in the press and work together, particularly on the settlement issue to move the process forward in a spirit of cooperation and of the historic friendship of the two nations."

"The truth is the fundamentals remain as they have been - if only the Palestinians and others would accept Israel's legitimacy, stop the terror from Hamas and other Palestinian groups, cease the teaching of hatred toward Israel, and negotiate a compromise, Israel will be there to work toward a solution as it always has been.

U.S.-Israel cooperation offers the best hope for improving relations with the Palestinians and Arabs and particularly, for countering the true threat to the region coming from Iran and the Islamic extremists," he added.