BETHLEHEM - US Secretary of State John Kerry urged Israel on Wednesday to limit settlement building, an issue that is weighing on Israeli-Palestinian peace talks.Friction over the talks has risen this past week on the back of Israeli plans, announced in tandem with its release of 26 Palestinian prisoners, for some 3,500 new homes for settlers in the West Bank and east Jerusalem."Let me emphasize at this point the position of the United States of America on the settlements is that we consider them... to be illegitimate," Kerry said after discussions with Palestinian President Mahmoud Abbas. Kerry made the comments in responding to Palestinian frustration over Israeli settlement construction in the West Bank and stressed that "at no time" did the Palestinians agree to accept the settlements as a part of a negotiated peace accord.Kerry, faced with grim Israeli and Palestinian assessments of progress in peace talks, said on Wednesday that Washington was not giving up on a deal."As in any negotiation there will be moments of up and moments of down, and it goes back and forth," Kerry said in Bethlehem, in the West Bank, where he met Palestinian President Mahmoud Abbas."But I can tell you that President Obama and I are determined, and neither of us will stop in our efforts to pursue the possibility (of peace)," he said. Earlier at a meeting with Kerry in nearby Jerusalem, Prime Minister Binyamin Netanyahu said the negotiations on a two-state solution to the Israeli-Palestinian conflict had failed to make any real progress.The bleak picture painted by the right-wing leader was similar to the one sketched by senior Palestinians, who have said an Israeli plan announced last week for 3,500 more settler homes in the occupied West Bank was a major obstacle to the success of the negotiations.But in Bethlehem, Kerry said the United States, Israel's closest ally, was convinced "that despite the difficulties, both leaders, Abbas and Netanyahu, are also determined to work towards this goal".During the meeting with Kerry, Abbas on Wednesday assured the US secretary of state that the peace talks with Israel would continue.“The Palestinians are committed to negotiations that would lead to the establishment of an independent Palestinian state with east Jerusalem as its capital,” Abbas was quoted by his spokesman, Nabil Abu Rudaineh, as telling Kerry.Abbas also told Kerry that the Palestinians consider all settlements to be illegitimate, Abu Rudaineh said.The spokesman’s remarks came in response to Kerry’s statements that Israel should “limit” construction in the settlements as much as possible.A PA official expressed disappointment that Kerry did not call for an immediate cessation of all settlement construction. “Talking about limiting the construction does not help the peace talks,” the official told The Jerusalem Post after the meeting. “It’s clear that the Americans have no intention to exert pressure on Israel to stop the construction.”“That is not to say that they weren’t aware – or we won’t aware – that there would be construction. But that construction, importantly, in our judgment, would be much better off limited as much as possible in an effort to create a climate for these talks to be able to proceed effectively.”Kerry, whose shuttle diplomacy helped to revive the land-for-peace talks last July after a three-year break, has set a nine-month target window for an agreement, despite widespread skepticism among Israelis and Palestinians.Few details have emerged from the negotiations, held at unannounced times and at secret locations in line with pledges to keep a lid on leaks.But Palestinian officials have been airing their frustration over a lack of movement on core issues such as the borders of a Palestinian state, security arrangements, the future of Israeli settlements and the fate of Palestinian refugees.Abbas, in a speech broadcast on Monday, said that after all the rounds of negotiations "there is nothing on the ground".JPost.com staff contributed to this report.