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US Secretary of State John Kerry warned Wednesday that Israel's settlement building in the West Bank threatens both
hope for peace with the Palestinians and the country's own future as a democracy.

Kerry's words came as part of a speech that set out his vision of a solution to the Israel-Palestine conflict, while also reassuring Israel of the United States' committment to its security.

"Today, there are a similar number of Jews and Palestinians living between the Jordan River and the Mediterranean Sea," Kerry told an audience of diplomats in Washington.

"They have a choice. They can choose to live together in one state, or they can separate into two states," he said.

"But here is a fundamental reality: if the choice is one state, Israel can either be Jewish or democratic – it cannot be both – and it won't ever really be at peace."

Following the recent resolution passed by the UN Security Council condemning Israeli settlement building, Prime Minister Binyamin Netanyahu publicly lashed out at the US for not using its veto power.

Israel has also accused the US of being behind the resolution, which got the vote of 14 out of 15 council members.

"The vote in the UN was about preserving the two-state solution," Kerry said.

"That's what we were standing up for: Israel's future as a Jewish and democratic state, living side by side in peace and security with its neighbours," he said.

"The two-state solution is the only way to achieve a just and lasting peace between Israelis and Palestinians," Kerry said, warning that such a solution was now in "serious jeopardy."

With the Obama administration preparing to hand the reins over to that of president-elect Donald Trump in January, the secretary of state is seeking to leave his mark on the Middle East peace process amid increasing hostility and dissatisfaction from Israel.

The clarification from Kerry is unlikely to drastically alter attitudes in Israel towards the Obama administration, however a vote on permits for settler homes was postponed at Netanyahu's request on Wednesday to avoid further conflict with Washington.

Netanyahu immediately denounced the speech as "skewed against Israel".

Speaking from his office, Netanyahu said the outgoing secretary of state paid only "lip service" to Palestinian violence against Israelis.

"What he did was he spent most of his speech blaming Israel for the lack of peace," Netanyahu said.

He added later that "Israelis do not need to be lectured about the importance of peace by foreign leaders".

In an earlier statement from Netanyahu's office, the premier said "like the Security Council resolution that Secretary Kerry advanced in the UN, his speech tonight was skewed against Israel".

"For over an hour, Kerry obsessively dealt with settlements and barely touched upon the root of the conflict -- Palestinian opposition to a Jewish state in any boundaries."

Meanwhile, Palestinian President Mahmoud Abbas said he was willing to resume peace talks with Israel as soon as it stopped its settlement building activities. 

"The minute the Israeli government agrees to cease all settlement activities... and agrees to implement the signed agreements on the basis of mutual reciprocity, the Palestinian leadership stands ready to resume permanent status negotiations on the basis of international law and relevant international legality resolutions... under a specified timeframe," Abbas said in a statement.