Undeterred, Palestinian President Mahmoud Abbas pressed toward a formal bid for U.N. recognition that could bring the issue to a head on Friday.
Addressing the U.N., President Barack Obama and French President Nicolas Sarkozy offered different solutions to defuse the diplomatic crisis. Sarkozy would have the Palestinians seek a lesser form of recognition at the U.N., while joining new talks with Israel.
The Israeli-Palestinian conflict, seen as a defining test of peace in modern times, overwhelmed other matters as members of the world body watched a crisis deepen before them.
A frustrated Obama declared to U.N. members that "there are no shortcuts" to peace, and he implored Israelis and Palestinians to restart direct talks. His influence limited and his hopes for a peace deal long stymied, Obama didn't directly call on the Palestinians to drop their bid for recognition from the U.N.
Security Council. But the U.S. threat to veto any such U.N. action loomed unmistakably.
"Peace will not come through statements and resolutions at the United Nations," Obama told delegates. "If it were that easy, it would have been accomplished by now."
Sarkozy supported an observer state status for Palestine but not full U.N. membership for now. That idea would head off a Security Council vote and veto that he said would risk "engendering a cycle of violence in the Middle East."
The French president proposed a one-year timetable for Israel and the Palestinians to reach an accord.
Palestinian officials made it clear that the latest proposal, while welcome, would do nothing to prevent them from going to the Security Council and seeking full statehood.
"This is a moment of truth," said Nabeel Shaath, an Abbas adviser.
At the heart of the fight, Abbas and Israeli Prime Minister Benjamin Netanyahu pursued support from other leaders but not each other. Various mediators searched for consensus for a diplomatic solution to preclude the showdown and revive peace talks.
Netanyahu thanked Obama for defending Israel, which fears that a Palestinian state drawn by the U.N. would include borders leaving the Jewish state vulnerable to attack. The United States is Israel's staunchest defender in demanding that direct talks are the only means to Palestinian statehood, a position that leaves Obama arguing against fast world endorsement of a Palestinian homeland he has repeatedly said he supports.
Palestinian senior aide Saeb Erekat said the pursuit of full U.N. membership would not be slowed: "We will not allow any political maneuvering on this issue," he said.
Beyond the public eye, U.S. and other officials began to concede that an effort to deter Palestinians from bringing the matter before the world body had failed, and the so-called Quartet of Mideast peace mediators worked on a deal intended to address the longstanding concerns of both sides. The Quartet consists of the United States, the European Union, the United Nations and Russia.
Under that compromise plan, the Quartet would issue a statement in which Israel would have to accept its pre-1967 Mideast War borders, with land exchanges, as the basis for a two-state solution, and the Palestinians would have to recognize Israel's Jewish character if there was to be a deal, officials close to the talks said.
The officials spoke on condition of anonymity to discuss ongoing diplomacy.
European officials, supported by the U.S., were outlining the compromise agreement to the Israeli and Palestinian governments and asking for tough concessions from each.
The Palestinians would petition the United Nations Security Council on Friday, as expected, but would agree not to press for action on the request for statehood recognition for a year, or would withdraw it later. That would allow Abbas to save face and prevent an embarrassing defeat that might empower his Fatah party's rival faction, the militant Islamic group Hamas, which is considered a terrorist group by Israel and the United States.
In the 15-member Security Council, approval of a resolution requires nine "yes" votes and no veto by a permanent member - the U.S., Russia, China, Britain and France. If the resolution gets fewer than nine votes, it would be defeated without the U.S. having to use its veto.
While the Palestinians' full membership bid would meet with a certain U.S. veto in the Security Council, assuming there were enough votes to have it approved, they still would have succeeded in bringing the issue back to the forefront of the world's political discussions after years of failed negotiations, bickering and sporadic outbreaks of violence.
Short of a full request for statehood recognition at the U.N.
Security Council, the Palestinians could also seek a lesser form of recognition by the larger U.N. General Assembly, where they have overwhelming support.
Sarkozy called for Israelis and Palestinians to return to talks in one month with no preconditions - requiring an enormous leap of faith from both sides - with six months to work out the issues of borders and security that have divided them for decades. He called for a peace accord within a year.
A senior European Union official said the proposal laid out by Sarkozy matched one by EU foreign policy chief Catherine Ashton during a meeting with EU foreign ministers on Tuesday. The official spoke on condition of anonymity because of the sensitivity of the discussions.
The proposal outlined by Sarkozy received a warmer welcome from the Palestinians than Obama's comments, which elicited stern looks from the Palestinian delegation.
"Ultimately, it is the Israelis and the Palestinians - not us - who must reach agreement on the issues that divide them," Obama said.
Were the Palestinians to accept the French approach, they would become a nonmember observer state at the U.N. That would give them an opportunity to seek membership in U.N. agencies and to join treaties, including possible access to the International Criminal Court. There, Palestinians could press legal claims against Israel for alleged abuses as an occupier.
Obama blitzed through a day of diplomacy that was appropriately bracketed by individual meetings with Netanyahu and Abbas.
Secretary of State Hillary Rodham Clinton also planned to meet separately with Netanyahu and Abbas.
Two years after declaring a new brand of U.S. leadership, and one year after calling for Israel and Palestinian leaders to reach a peace deal by now, Obama found himself standing before the U.N.
delegates and admonishing them about what their goal should be - encouraging the parties to sit down together.
"That is the project to which America is committed," he said.
"There are no shortcuts. And that is what the United Nations should be focused on in the weeks and months to come."
Netanyahu, with Obama at his side, told reporters that world leaders were under "enormous pressure" but should follow the lead set by the United States. To Obama, with whom he has not shared much public chemistry, Netanyahu said the president had stood on principle in his speech and thanked him for wearing what he called a badge of honor.
Senior Palestinian officials said Abbas, in a late afternoon meeting, would reiterate to Obama his decision to move forward with the application for membership. But they also said the Palestinians seek to cooperate with the U.S. and would be ready to return to the negotiating table once a solid foundation for talks was in place.
--- Associated Press writers Mohammed Daraghmeh, Amy Teibel, Julie Pace, Steven R. Hurst and Edith M. Lederer in New York contributed to this report.
Meanwhile, the Gridlock alert continues. First Avenue will be closed to traffic from 42nd to 47th streets. Security will continue to be tight, with diplomats from around the world staying in the city.
UNITED NATIONS GENERAL ASSEMBLY
Streets subject to closure at the discretion of NYPD:
W 34 St to E 57 St from 1 Avenue to 2 Ave, all inclusive
E 50 St between FDR Dr and 6 Ave
E 43 St, 44, 45, 46 and 47 St from 1 Ave to 3 Ave
E 45 St and 46 St from Madison Ave to Vanderbilt Ave (all inclusive)
E 48 St 49 and 51 St from Madison Ave to 1 Ave
E 48, 49, 50, and 51 St from Lexington Ave to Madison Ave (all inclusive)
W 52 St and 53 St from 6 Ave to 7 Ave
W 54 St from 6 Ave to 7 Ave
6 Ave from W 54 St to W 55 St
Streets subject to intermittent closures at the discretion of NYPD:
Area bounded by; East 60th Street on the North, East 34th Street on the South, 1st Avenue on the East, 3rd Avenue on the West
Area bounded by; East 51st Street on the North and East 48th Street on the South; 1st Avenue on the East and Madison Avenue on the West
34th, 42nd, 50th and 57th Streets between FDR Drive and 7th Avenue
5th Avenues between 42nd and 40th Street
6th Avenues between 42nd and 40th Street
40th Street between 5th Avenue and 6th Avenue
53rd Street between 5th Avenue and 7th Avenue
52nd Street between 6th Avenue and 7th Avenue
55th Street between 6th Avenue and Madison Avenue
51st, 54th and 56th Streets between 6th Avenue and 5th Avenue
UNGA & HOTEL RESTRICTIONS
1st Avenue from 42nd to 49th Streets
42nd, 44th & 45th Streets from 1st to 2nd Avenues
45th Street from Madison to Vanderbilt Avenues
Vanderbilt Avenue from 46th to 44th Streets
46th Street from 1st to 2nd Avenues
49th & 50th Streets from Park to Lexington Avenues
61st Street from Park to Madison Avenues
(The Associated Press contributed to this report.)