WASHINGTON - US President Barack Obama on Thursday backed a key Palestinian demand on the borders of a future state with Israel as part of his vision for a Middle East peace deal and sought to shape political change convulsing the region.

Obama's proposal, a policy shift that effectively calls for a negotiated Israeli pullback to 1967 borders that existed before it occupied the West Bank and East Jerusalem, drew a swift rejection from Israeli Prime Minister Benjamin Netanyahu on the eve of his Washington visit.

The president's first public endorsement of the idea, in laying out his most detailed framework yet for an elusive peace deal, came in a much-anticipated "Arab spring" address aimed at recasting the US response to upheaval sweeping the Arab world.

"At a time when the people of the Middle East and North Africa are casting off the burdens of the past, the drive for a lasting peace that ends the conflict and resolves all claims is more urgent that ever," Obama told an audience of US and foreign diplomats at the State Department.

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Obama's bid to reset ties with a skeptical Arab world was aimed at countering criticism of an uneven response to the region's uprisings that threaten both US friends and foes and his failure to advance Israeli-Palestinian peacemaking.

His blunt language toward US ally Israel about the need to find an end to its occupation of Arab land could complicate his talks on Friday with Netanyahu while easing Arab doubts about his commitment to even-handed US mediation.

Obama also had tough words for the Palestinians for what he described as efforts to "delegitimize" Israel, a staunch US ally in the region for decades.

But he urged Israel to act "boldly" and for both sides to revive long-stalled peace talks. "The dream of a Jewish and democratic state cannot be fulfilled with permanent occupation," Obama said.

MOST DETAILED PEACE VISION

Seizing on the decades-old conflict long seen as a catalyst for broader Mideast tensions, Obama went further than he has ever gone in offering principles for resolving the stalemate between Israel and the Palestinians.

But he stopped short of presenting a formal US peace plan, an omission that could disappoint many in the Arab world, after having failed to make progress on the Israeli-Palestinian front since taking office in 2009.

Among the parameters he laid down was that any agreement creating a state of Palestine must be based on borders that existed before Israel captured the West Bank in the 1967 Arab-Israel war but "with mutually agreed swaps" of land.

Netanyahu said Israel would object to any withdrawal to "indefensible" borders, adding he expected Washington to allow it to keep major settlement blocs in any peace deal.

Before heading to Washington, Netanyahu said in a statement that "the viability of a Palestinian state cannot come at the expense of Israel's existence."

Obama's insistence on the borders issue,plus his criticism of continued Israeli "settlement activity", sends a message to Netanyahu that Washington expects the Jewish state to make concessions.

Obama and Netanyahu have had a strained relationship, and prospects for their talks to yield any significant progress on peace moves have been viewed as dim.

Still, Obama reaffirmed an unshakable US commitment to Israel's security and condemned what he called "symbolic actions to isolate Israel at the United Nations," referring to the Palestinians' plan to seek General Assembly recognition for statehood in September.

And he acknowledged that a new reconciliation deal between the Palestinian Authority and the Islamist group Hamas raised "legitimate questions" for Israel, which has condemned the accord as blocking any new peace talks.

Putting pressure on Netanyahu, who will address the pro-Israel lobby AIPAC on Monday and a joint session of Congress on Tuesday at the invitation of his Republican supporters, could be politically risky for the Democratic president as he seeks re-election in 2012.

"President Obama has thrown Israel under the bus," said likely Republican candidate Mitt Romney. "He has disrespected Israel and undermined its ability to negotiate peace."