Palestinian negotiator Saeb Erekat said that demand could never be accepted, while his colleague Nabil Sha'ath added that the government in Ramallah would not tolerate a partial construction freeze and that the moratorium must also be applied in occupied East Jerusalem.
Senior Palestine Liberation Organization official Yasser Abed Rabo accused Netanyahu of using the proposal to weaken the image of U.S. President Barack Obama in the Middle East.
Rabo also said Netanyahu was begging to destroy the so-called peace process and had made the offer to distract from deliberations on the core issues.
The Palestinian leadership was prompt to reject Netanyahu's proposal when he offered it on Monday.
Nabil Abu Rdainah, spokesman for Palestinian President Mahmoud Abbas, said a return to U.S.-backed peace talks required a freeze on settlement building by Israel and emphasized that:
"The issue of the Jewishness of the state has nothing to do with the matter."
In his proposal, Netanyahu stressed that Israel was willing to make concessions and that a peace deal and a Palestinian state could be achieved if the Palestinians would be willing to recognize Israel as the “Jewish homeland”.
"If the Palestinian leadership will say unequivocally to its people that it recognizes Israel as the homeland of the Jewish people, I will be ready to convene my government and request a further suspension," Netanyahu said while speaking at the opening of the third session of the 18th Knesset.
"The Palestinians wasted 10 months and now they demand to continue the [settlement] freeze. I hope their demand isn't a ploy to avoid the concessions that must be made in order to achieve a peace deal," he said.
Israeli daily Yediot Aharonot said it was "implicit" from Netanyahu's speech that he was "going to do everything to torpedo the negotiations with the Palestinians at their current stage. "Netanyahu is searching for any possible trick to push the Palestinians into the position of being rejectionists," wrote Shimon Shiffer in an analysis headlined: "The Derailer."
"When he demands that Abbas recognize Israel as a state of the Jewish people, he is offering assisted political suicide to the Palestinian leader," wrote Haaretz commentator Akiva Eldar. Acknowledging that would be tantamount to "an upfront concession on the right of return," he said. "Netanyahu understands that this is an asset that is too precious and too complex for the Palestinians to just give up for cheap -- namely, a temporary, partial freeze on construction in settlements."
For one senior member of Netanyahu's right-wing Likud party, Netanyahu's maneuver had practically ruled out any renewal of a building freeze in the West Bank. "His proposal pushes off a building freeze and talks with the Palestinians," the Likud official told the Yediot. "Negotiations with the Americans are at an impasse, so Netanyahu came up with a proposal to show that he is willing to continue the talks, but it is clear that the Palestinians will not agree. "Therefore, there is virtually no chance that the construction freeze will be reinstated," he said.
