JERUSALEM — Israel allowed a politically charged freeze on Jewish settlement building in the West Bank to expire on Sunday, but the Palestinians did not carry out a threat to quit peace negotiations, setting the stage for further frantic efforts to keep the talks alive.
For President Obama, who had publicly called on Israel to extend the freeze, the Israeli decision was another setback in what has been a tortuous effort to help resolve one of the world’s most intractable conflicts.
American officials spent Sunday desperately seeking a formula to satisfy both sides — an effort that failed to produce a compromise from the Israelis but that may have helped persuade the Palestinians to delay a decision on abandoning the talks until the Palestinian Authority president, Mahmoud Abbas, consults with Arab leaders in coming days.
Minutes after the 10-month moratorium on building expired, Prime Minister Benjamin Netanyahu of Israel issued a statement calling on Mr. Abbas “to continue the good and sincere talks that we have just started, in order to reach an historic peace agreement between our two peoples.”
But Mr. Netanyahu made no reference to the settlement freeze, which Mr. Abbas has said repeatedly must be extended in order for the Palestinians to remain in negotiations with Israel. Getting past this obstacle has overshadowed all the other issues in the first direct talks between Israelis and Palestinians in nearly two years.
In the West Bank, meanwhile, jubilant settlers poured cement and released thousands of blue and white balloons to signal the resumption of construction.
Israeli officials said that Mr. Netanyahu felt bound by his promise not to extend the moratorium beyond 10 months. He is also hemmed in by his right-leaning coalition government, which strongly opposes the ban on construction in the West Bank territories that Israel has occupied since the 1967 Arab-Israeli war.
“It is a read-my-lips moment,” said Michael B. Oren, the Israeli ambassador to the United States. “This establishes credibility, not just for the Israelis but for the Palestinians. Establishing that the man is true to his word is going to be a very important asset going forward.”
The Obama administration said in a statement that it would continue its diplomatic efforts to keep the talks going, and pointedly reaffirmed its opposition to Jewish settlements.
“Our policy on settlement construction has not changed,” said the State Department spokesman, Philip J. Crowley. As recently as last Thursday, before the United Nations, Mr. Obama urged Mr. Netanyahu to extend the moratorium.
The immediate question was whether the Palestinians would keep negotiating. Much of the diplomacy in the past few days was aimed at Mr. Abbas to persuade him to find a way to do so.
The Obama administration’s special representative to the Middle East, George J. Mitchell, met in New York on Sunday afternoon with the chief Palestinian negotiator, Saeb Erekat.
Mr. Abbas told the pan-Arab daily newspaper Al Hayat in an interview published on Sunday that if the building moratorium was not extended, his next step would be to consult with the Palestine Liberation Organization and Arab League leaders. This seemed short of actually ending the talks with Mr. Netanyahu, but it remained unclear how Arab leaders would react.
In a telephone interview from Paris, a Palestinian spokesman, Nabil Abu Rudeineh, said that Mr. Abbas had requested a meeting of the Arab League follow-up committee for next week to come to a united Arab position.
United States officials have said in recent weeks that the Arab world is eager for the talks to continue. But Arab officials have said numerous times that settlement building and peace-making cannot go together.
The Popular Front for the Liberation of Palestine, one of the factions in the Palestine Liberation Organization, announced the suspension of its participation in the group in protest over Mr. Abbas’s participation in the talks.
Secretary of State Hillary Rodham Clinton kept up her last-minute efforts to find a solution, speaking twice by phone on Sunday with Mr. Netanyahu, according to Mr. Crowley. She also spoke with Tony Blair, a former British prime minister, who serves as the representative of the so-called quartet of Middle East peacemakers — the United States, the United Nations, the European Union and Russia.
Administration officials did not conceal their disappointment, or fear about what Israel’s decision may mean for the peace process. “We knew we faced a gap,” said a senior official, who spoke on the condition of anonymity because of the volatility of the situation. “With the expiration of the moratorium, we now have a rupture. The question in coming days will be, what combination of action could bridge that rupture?”
Some officials around Mr. Netanyahu have suggested building only in settlement blocks expected to stay in Israeli hands in an eventual two-state solution. But the Palestinians have said the borders needed to be agreed upon first.
Then, but not before, building could resume within settlements granted to stay within Israel in exchange for land elsewhere for the Palestinian state.
Mr. Netanyahu issued an official request on Sunday to the settlers and to all factions in Israel to “show restraint and responsibility” regarding the end of the settlement freeze, meaning to avoid provocation.
But celebrations held first at the settlement of Kiryat Netafim, where a cornerstone was laid for a new kindergarten, and then at the nearby settlement of Revava seemed anything but restrained. Several thousand supporters were bused in, balloons were released and speeches were made about Jewish rights and a policy that bars only Jews from building homes there, which the settlers regard as racist.
“For 10 months you have been treated like second-class citizens,” Danny Danon, a member of Mr. Netanyahu’s Likud Party, said at the settlement ceremony. “Today we return to build in all the land of Israel.”
Gershon Mesika, head of a regional council of settlers, used Mr. Obama’s Arabic middle name to emphasize the alienation he and other Jewish settlers felt toward him.
“From this stage, I turn to Hussein Obama and tell him, the land of Israel belongs to the people of Israel,” he said.
With Mr. Netanyahu sticking to his promise that the building freeze was a one-time gesture that the Palestinians had failed to take advantage of, it seemed probable that other gestures would be made to the Palestinians, including perhaps the release of some Palestinian prisoners from Israeli jails.
Mr. Oren expressed frustration that the Palestinians had waited until nine months into the freeze to start talking. “It’s like a football team that runs the clock down to the last second, and then demands overtime,” he said.
In Gaza, the leaders of Hamas, the militant Islamic group that governs that territory, urged Mr. Abbas, the leader of rival Fatah party, to end the direct talks and concentrate on uniting the Palestinians.
“Resuming direct negotiations is a crime against the Palestinian people,” said a Hamas spokesman, Fawzi Barhoum. “It will come at the expense of national unity.”
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