Israeli and Palestinian leaders began direct peace negotiations on Thursday, sitting down for U.S.-brokered talks even as hard-liners on both sides vowed never to accept a deal.

One day after U.S. President Barack Obama made a personal appeal for peace, Secretary of State Hillary Clinton welcomed Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas to the State Department to begin talks aimed at establishing an independent Palestinian state.

By being here today, you each have taken an important step towards freeing your peoples from the shackles of a history we cannot change and moving towards a future of peace and dignity that only you can create, Clinton said as talks began.

The direct peace talks, which Obama hopes can reach a deal within a year, come after a 20-month hiatus. Negotiators face deep divisions among both Israelis and Palestinians over the prospects for peace.

The Palestinian Islamist group Hamas, which seized control of the Gaza Strip from Abbas' Fatah party in 2007, denounced the talks and said it would keep on attacking Israelis.

Jewish settlers meanwhile vowed to launch new construction in their enclaves in the occupied West Bank, saying they could never accept a phony peace that curbs their right to live in what they consider Israel's biblical homeland.

Obama, hosting the Washington talks ahead of the pivotal November U.S. congressional elections, used separate meetings with Netanyahu and Abbas on Wednesday to urge them not to let the chance for peace slip away.

The issue of settlements looms large over the peace talks. Abbas has warned he will walk out unless Israel extends its self-imposed moratorium before it expires on September 26.

But Netanyahu, who heads a coalition dominated by pro-settler parties, has resisted any formal extension of the partial construction freeze, meaning the fledgling negotiations will face a major challenge within weeks.

Four Israeli settlers were killed by Hamas in a shooting attack in the West Bank on Tuesday. Another two people were wounded in a similar attack by suspected Palestinian gunmen on Wednesday despite a crackdown by Palestinian police.

A Hamas spokesman on Thursday dismissed the Washington talks, and said Abbas, who leads the Fatah faction that holds sway in the West Bank, does not have the right to speak for the Palestinians.

Jewish settlers, who have threatened to depose Netanyahu if he does not allow them to resume building, said they planned to launch new construction even before the government's freeze ends on September 26. They also rejected Palestinian hopes to set up their own state on the West Bank.

Once they understand Israelis are here to stay and only growing stronger day by day, they will give up, said Naftali Bennett, director of the settlers' YESHA council.

(Additional reporting by Arshad Mohammed and Rachelle Younglai in Washington, Nidal al-Mughrabi in Gaza, Tom Perry in Ramallah, and Allyn Fisher-Ilan in Jerusalem, editing by Will Dunham)