A frustrated U.S. secretary of state demanded Thursday action from recalcitrant Israeli and Palestinian leaders, saying it was time for them to demonstrate leadership in the crisis-hit peace talks.

But John Kerry acknowledged in Algiers that negotiators from the two sides had made "progress" in lengthy overnight talks in Jerusalem, also attended by the Americans.

Comments by Israeli Prime Minister Benjamin Netanyahu at the World Economic Forum make it clear he is against the establishment of a Palestinian state, chief Palestinian negotiator Saeb Erakat has said.

"Anyone who says they want the settlers to remain is actually saying they don't want the establishment of a Palestinian state," Erakat said in remarks published Monday in Palestinian daily Al-Ayyam.

Israeli plans unveiled Friday to build over 1,800 settler homes are a signal to U.S. Secretary of State John Kerry not to pursue his peace push, a top Palestinian negotiator said.

"The new settlement construction plan is a message from (Prime Minister Benjamin) Netanyahu to Kerry not to come back to the region to continue his efforts in Israeli-Palestinian peace talks," Saeb Erakat told AFP.

Efforts to reach an Israel-Palestinian peace deal may need to be extended for another year, if parties agree on key issues by the time the current round of talks wraps up in April, the chief Palestinian negotiator said.

U.S. Secretary of State John Kerry launched nine months of direct talks between the sides in July after a three-year stalemate, and has insisted he is aiming for a full deal and not an interim agreement by April 29.

A top Palestinian negotiator on Thursday said peace talks with Israel were "difficult and complicated", after a meeting between Palestinian president Mahmoud Abbas and U.S. Secretary of State John Kerry.

"The situation is still very difficult and matters are complicated," Saeb Erakat told Agence France Presse.

The United States expressed surprise and concern Tuesday over a report that Israel is planning to build 20,000 new settler homes in the occupied West Bank.

"We are deeply concerned by this latest report," said State Department spokeswoman Jennifer Psaki. "We were surprised by this announcement and are currently seeking further explanation from the government of Israel."

Palestinian and Israeli negotiators have held a new round of peace talks in Jerusalem, a Palestinian official said, saying it had focused on the issue of water resources.

Monday's session was attended by Israeli Justice Minister Tzipi Livni and Palestinian negotiators Mohammed Shtayeh and Saeb Erakat, the official said.

Russia received the chief Palestinian negotiator with Israel on Thursday, urging the two sides to strengthen trust to build stability in the recently resumed Middle East peace negotiations.

"We understand that you are only at the very start. We want the resumed talks to assume stability," news agencies quoted Russian Foreign Minister Sergei Lavrov as telling Saeb Erakat at the start of their meeting.

Palestinian negotiator Saeb Erakat says that Israel will free the first batch of a promised 104 long-serving Palestinian and Israeli Arab prisoners on August 13.

"The release of veteran prisoners will be in four batches as Israel refused to release them all at once," he said in a statement.

The next round of direct Israeli-Palestinian peace talks will take place in the region during the second week of August, Israel's negotiator Tzipi Livni, who is also justice minister, said Saturday.

"These discussions that began in Washington will resume during the second week of August and will take place in the region," Livni told the private Channel 10 television station.