Obama was to meet Palestinian president Mahmud Abbas at 9am GMT and then Prime Minister Salam Fayyad, on the second day of his visit to Israel, the West Bank and Jordan, dominated by the growing regional challenges of Iran and Syria.
The president, on the first foreign trip of his second term, says he has came to the Holy Land simply to listen to leaders on both sides of the peace talks, which have been frozen for two-and-a-half years.
He said he decided against coming armed with a comprehensive peace plan that might not be fit for current political conditions.
"Ultimately, this is a really hard problem," Obama said during a press conference with Israeli Prime Minister Benjamin Netanyahu on Wednesday.
"It's been lingering for over six decades. And the parties involved have, you know, some profound interests that you can't spin, you can't smooth over. And it is a hard slog to work through all of these issues."
Obama's new approach was a stark contrast to early in his first term, when he declared that Israeli settlement building that ultimately scuppered his peace efforts was illegitimate and promised to dedicate himself to peace.
He admitted on Wednesday that he had perhaps made mistakes, but argued that he was not the only US leader to have come a cropper on the issue.
"I hope I'm a better president now than when I first came into office," Obama said.
"I'm absolutely sure that there are a host of things that I could have done that would have been more deft and, you know, would have created better optics."
Palestinian peace negotiator Nabil Shaath on Wednesday published an op-ed message to Obama in the Israeli newspaper Haaretz, urging him to prove his commitment to a two-state solution by turning pledges into deeds.
"We could have saved lives and political capital if President Obama had shown the determination to create the right environment for meaningful decisions leading to a two-state solution," he wrote.
"Now, rather than calling for the resumption of a meaningless 'peace process', we Palestinians expect real action on the ground."
Shaath added that Obama had disappointed Palestinians who once warmed to his calls for an end to settlement building.
"President Obama appeared to give up on his goal," he said.
Separately on Wednesday, Palestinian militants pitched a protest camp on the site of a contested Jewish settlement, demanding an end to Obama's "bias and support for Israel".
Israel's plan to build in a strip of West Bank land outside Jerusalem called E1 has sparked a major international backlash, with experts saying it could wipe out hopes for the establishment of a viable Palestinian state.
Netanyahu however on Wednesday re-committed to the notion of a two-state solution for the first time since he was re-elected in January, albeit in a weaker political position.
"So let me be clear: Israel remains fully committed to peace and to the solution of two states for two peoples," he said as he stood with Obama.
The Palestinians are hoping Obama will help broker the release of more than 1 000 prisoners held by Israel and also free up $700-million in blocked US aid.
At the news conference on Wednesday, Obama, who met Netanyahu for two hours and then had dinner with the Israeli leader, accepted the Jewish state would not cede its right to confront Iran's nuclear threat to the United States.
Tension and apparent mistrust that stained some previous encounters between Obama and Israeli Prime Minister Benjamin Netanyahu seemed to have dissolved when the leaders emerged from two hours of talks.
"Israel is differently situated than the United States, and I would not expect that the prime minister would make a decision about his country's security and defer that to any other country."
Washington has worried that Netanyahu's hawkish rhetoric on Iran and warnings it could get most of the way to a nuclear bomb within months – a shorter timeline than Washington's – has sparked fears of an Israeli strike.
But Obama came to Israel apparently determined to remove all doubts about his commitment to Israel which have harmed his reputation here, and proven a thorny political issue at home.
He will return from the West Bank to redouble his Israeli charm offensive by giving a speech to hundreds of young people in a Jerusalem conference center.
Obama also issued a stark warning to Syria about using chemical weapons against its civilians, saying it would be a "game-changer that would invite international action. – Sapa-AFP