Working toward a two state solutionSTORY HIGHLIGHTS- The two sides will be relaunching talks that have been stalled for a year and a half
- Obama says he is "hopeful -- cautiously hopeful" about the talks
- Netanyahu, Abbas, Mubarak, and King Abdullah II had dinner at White House on Wednesday
Washington (CNN) -- Direct peace talks between Israelis and Palestinians will start Thursday as President Obama urged both sides to come up with a peaceful solution to the long-running Mideast conflict.
U.S. Secretary of State Hillary Clinton is set to play the main role in the talks by hosting a meeting Thursday at the State Department with Israeli Prime Minister Benjamin Netanyahu and Palestinian leader Mahmoud Abbas.
The two sides will be relaunching talks that have been stalled for a year and a half.
On the eve of the talks, Obama held a working dinner with Abbas, Netanyahu, Egyptian President Hosni Mubarak and Jordan's King Abdullah II.
"I am hopeful -- cautiously hopeful, but hopeful -- that we can achieve the goal that all four of these leaders articulated," Obama said before dinner.
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- Benjamin Netanyahu
- Mahmoud Abbas
Clinton and Middle East Quartet Representative Tony Blair also attended the dinner. The Quartet consists of the United States, Russia, the United Nations and the European Union.
Netanyahu and Abbas reiterated their goal to come up with a solution and condemned attacks against the Israelis in recent days.
"We don't seek a brief interlude between two wars, we don't seek a temporary respite between outbursts of terror," Netanyahu said. "We seek a peace that will end the conflict between us once and for all... for our generation, our children's generation and the next."
Abbas said it was time to end the bloodshed from Israelis and Palestinians.
"We want peace between the two countries ... let us sign a formal agreement for peace and put an end to this long period of suffering forever," he said.
As the talks begin, other issues loom. One immediate threat is the September 26 expiration of Israel's 10-month freeze on settlement construction in the West Bank.
Another roadblock is the Palestinian view that any two-state solution must include a handover of all the land Israel captured in the 1967 war, along with East Jerusalem as the Palestinian capital.
While Netanyahu has expressed openness about a Palestinian state, he also has strong opposition to a Palestinian takeover of East Jerusalem.
Hamas' control of Gaza also remains a "major problem," Chief Palestinian negotiator Saeb Erakat said.
While Gaza is generally considered to be part of any future Palestinian state, Hamas has refused to recognize Israel's right to exist and is not a part of the talks.
Leaders of Hamas are frequently in conflict with the more moderate Abbas and his Fatah organization, which has the upper hand in the West Bank.
With the U.S. war in Iraq drawing to a close, the Middle East has moved front and center for administration officials.
In earlier remarks from the White House Rose Garden, Obama said that "this moment of opportunity may not soon come again." However, he also pointed to challenges ahead.
"We are under no illusions," he said. "Passions run deep ... there's a reason that the two-state solution has eluded previous generations --- this is extraordinarily complex and extraordinarily difficult."
Several top officials close to the negotiations told CNN that it is hard to be optimistic about a peace deal at the moment. They downplayed expectations, saying that nobody directly involved in the talks expects a deal to be reached this week. But simply resuming talks was a critical step, and a comprehensive Middle East peace deal has been one of Obama's top foreign policy goals, they said.
CNN's Ed Henry, Alan Silverleib, Hala Gorani and David Molko contributed to this report