JERUSALEM, Sept. 12 (Xinhua) -- Israeli Prime Minister Benjamin Netanyahu on Sunday urged the Palestinians to recognize Israel as "Jewish people's state" and called for "two states for two peoples " as part of a solution to the Israeli -- Palestinian conflict.

"We say that the solution is two states for two peoples, meaning two national states, a Jewish national state and a Palestinian national state," Netanyahu told ministers at the weekly cabinet session.

"A peace agreement is based, first of all, on the recognition of Israel as the national state of the Jewish People," the premier added.

Netanyahu is scheduled to meet Tuesday with Palestinian National Authority (PNA) President Mahmoud Abbas at the Egyptian Sharm el-Sheikh resort for the fresh round of direct talks after an initial parley in Washington with the United States President Barack Obama two weeks ago.

U.S. Secretary of State Hillary Clinton, U.S. middle east special envoy Senator George Mitchell, Egyptian President Hosni Mubarak and other senior officials are expected at the session at the Red Sea resort, which has been the venue for several such peace parleys over the years.

"I hope that if the Palestinians adopt this basic principle, we will be able to resolve other issues as well, and next year we will be able to wish each other well over the peace that has been achieved," Netanyahu said in a statement sent to Xinhua.

Palestinian interlocutors, however, have said they were not prepared to grant Israel such recognition.

"Israel can call itself whatever it wants. We don't have to recognize those definitions," Abbas told the east Jerusalem Al- Quds newspaper last week.

As well, "The Palestinian National Authority will never recognize that Israel is the national state for Jewish people, as such recognition will directly threaten the Muslim and Christian Palestinians in Israel, and will prevent the Palestinian refugees who left their homes and towns decades ago, from having the right to return," PNA negotiator Nabil Shaath told reporters in Ramallah last week.

But the Israeli side says that such recognition is crucial in building mutual trust.

"Just as we are asked to recognize the Palestinian national state, and I expressed this national agreement during the past year, we also demand and expect the Palestinians to recognize a Jewish state, the State of Israel, as the national state of the Jewish People. This is the true foundation of peace," Netanyahu told the ministers.