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The Palestinian Authority on Thursday dismissed Israeli and U.S. announcements of "progress" regarding the Middle East peace progress.

"There is absolutely nothing new, as of this moment, regarding the situation facing the peace process," Nabil Abu Rdainah, an aide to Palestinian President Mahmoud Abbas, told Reuters. He said Abbas would brief the Arab League, which meets in Libya on March 27-28, about the situation.

Prime Minister Benjamin Netanyahu said on Thursday that progress had been made toward resolving the diplomatic crisis with the United States over the contentious plan to build more Jewish homes in East Jerusalem.

"We are trying to find the golden path between our will to advance the peace process along with the United States, and between maintaining the standard policy of all Israeli governments," said Netanyahu just before boarding a plane back to Israel early Thursday.

White House spokesman Robert Gibbs said, meanwhile, that U.S. President Barack Obama had "asked the prime minister to take steps to build confidence for proximity talks so that progress can be made toward comprehensive peace".

"I think we're making progress on important issues. But nothing more on substance to report than that," Gibbs said on Thursday.

Netanyahu arrived back in Israel on Thursday evening, and was set to convene his forum of top seven ministers immediately to update the ministers on the results of his Washington visit. That meeting was postponed until Friday.

Despite the prime minister's comments of progress, Netanyahu's meeting with UObama earlier this week has been defined as a failure.

Netanyahu had delayed his departure from Washington in an effort to seek consensus after an Israeli announcement of housing construction in East Jerusalem during U.S. Vice President Joe Biden's trip to Israel earlier this month prompted a chill in bilateral relations.

Due to the controversy with Obama, Netanyahu changed his schedule on Wednesday and canceled a number of interviews and press conferences, remaining at the Israeli Embassy throughout the day and giving directives to his advisers, Yitzhak Molcho and Ron Dermer, who held talks with Mideast envoy George Mitchell and senior White House officials.

On Wednesday afternoon, while Netanyahu's and Obama's advisers were meeting, the White House released a statement condemning Israel's plan to build 20 housing units on the site of the Shepherd Hotel in East Jerusalem.

The Prime Minister's Bureau released a statement that there were no limitations on rights of ownership in Jerusalem.

A meeting between Netanyahu and Obama on Tuesday and a shorter meeting later that day had failed to bridge their serious disagreement over the continuation of the peace process and construction in East Jerusalem. Obama asked Netanyahu to clarify his positions on a letter delivered last week to the administration about Israeli gestures to the Palestinian Authority and his willingness to seriously broach the issues in the indirect talks. The president also asked Netanyahu to put these assurances in writing.

Mitchell met with Netanyahu at his Washington hotel on Wednesday in a last-ditch effort to smooth over the rift.

Netanyahu's speech to the American Israel Public Affairs Committee conference Monday and his meetings with senators and Congress members Tuesday added to the tension, since he reiterated the message that there would be no concession regarding construction in Jerusalem.