JERUSALEM - U.S. envoy George Mitchell and Israeli Prime Minister Benjamin Netanyahu ended more than two hours of talks Tuesday without any sign of a deal on a settlement freeze crucial to restarting Middle East peace talks.

News of the success or failure of Mitchell's mission appeared unlikely until Wednesday, when he and Netanyahu were due to meet again and the envoy could report on his planned talks later Tuesday with Palestinian President Mahmoud Abbas.

Mitchell has been trying to work out a deal with a defiant Netanyahu over U.S. President Barack Obama's demand that he halt construction in settlements in the occupied West Bank and Arab nations would take initial steps toward recognizing Israel.

We hope to bring this phase of our discussions to early conclusion and to move forward in our common search for a comprehensive peace in the region, Mitchell told reporters, indicating he hoped to finalize an agreement during his current visit, which began Saturday.

Resisting U.S. pressure and angering the Palestinians, Netanyahu has said he would be prepared to limit temporarily the scope of construction to help to revive peace talks suspended since December, but projects under way would continue.

A possible meeting at the U.N. General Assembly in New York next week involving Obama, Netanyahu and Abbas appeared to hang on the success of Mitchell's current efforts.

Abbas has made a resumption of peace negotiations with Israel conditional on a construction freeze in settlements.

GOOD TALKS

Netanyahu's office described the prime minister's talks with Mitchell Tuesday as good, but did not elaborate. After the meeting, Israel Radio announced it would carry an interview with Netanyahu, but it later said it was unclear exactly when it would take place.

Last week, Israeli Defense Minister Ehud Barak drew a U.S. rebuke by approving 455 building permits in settlements in the West Bank, land Israel captured from Jordan in a 1967 war and which Palestinians want as part of a future state.

The move was widely seen in Israel as a bid to placate settlers before any deal with Washington on construction limitations.

But Israel also has made clear it would continue building 2,500 settler homes already under construction and that any restrictions would not include Jewish housing in East Jerusalem, which it also captured in the fighting 42 years ago.

Some 500,000 Israelis live in the West Bank and in Arab East Jerusalem, also captured in 1967, alongside some three million Palestinians. The World Court calls the settlements illegal and Palestinians say the enclaves could deny them a viable state.

(Editing by Dominic Evans)

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