In the first face-to-face meeting between the two leaders since Trump's victory in the 2016 presidential election, the Republican president backed away from a U.S. commitment to eventual creation of a Palestinian state, upending a position embraced by successive administrations and the international community.
"I'm looking at two states and one state, and I like the one both parties like," Trump told a joint news conference with Netanyahu. "I can live with either one."
Trump vowed to work toward a peace deal between Israel and Palestinians but said it would require compromise on both sides and up to the parties themselves ultimately to reach the terms of any agreement. But he offered no new prescription for achieving an accord that has eluded so many of his predecessors.
Dropping a bombshell on Netanyahu as they faced reporters just before sitting down for talks, Trump told him: "I'd like to see you pull back on settlements for a little bit."
The right-wing Israeli leader, who may have expected more decidedly pro-Israel rhetoric, appeared startled. When given a chance to respond, he insisted that Jewish settlements were "not the core of the conflict" and made no commitment to reduce settlement building.
Trump echoed Netanyahu's calls for Palestinians to recognize Israel as a Jewish state - something they have refused to do - and to halt incitement against Israelis.
But even as Trump promised to pursue peace between the two sides - who have had no substantive peace talks since 2014 - he offered no new ideas for unblocking the peace process.
Setting a chummy tone for the meeting, Trump greeted Netanyahu on a red carpet rolled out to the White House driveway. The two leaders smiled, shook hands and chatted amiably before heading inside the executive mansion, accompanied by first lady Melania Trump and Netanyahu's wife Sara.
Among the questions expected to figure prominently on the agenda was the future of the two-state solution - the idea of creating a Palestine living peacefully alongside Israel.
Foreshadowing Trump's policy shift, a senior White House official said on Tuesday that peace did not necessarily have to entail Palestinian statehood, and Trump would not try to "dictate" a solution. Palestinians responded by urging Trump not to abandon their goal of statehood.
Giving a convoluted response to a question on whether he backed a two-state solution, he suggested that he could abide by whatever the two parties decided.
"I thought for a while it looked like the two-state, looked like it may be the easier of the two, but honestly if Bibi and if the Palestinians if Israel and the Palestinians are happy, I'm happy with the one they like the best," Trump said, referring to Netanyahu by his nickname.
Netanyahu committed, with conditions, to the two-state goal in a speech in 2009 and has broadly reiterated the aim since. But he has also spoken of a "state minus" option, suggesting he could offer the Palestinians deep-seated autonomy and the trappings of statehood without full sovereignty.
At the news conference, he never ruled out a two-state solution, but also made it sound as if it was an almost impossible ideal. He said there were preconditions for it to happen, including the Palestinians' recognition of Israel as a Jewish state and Israel retaining security control in the Jordan Valley - demands that Palestinians reject.
Netanyahu and Trump shared several warm handshakes during the news conference, especially after Trump's opening remarks, when he said the United States was Israel's greatest friend.
But Trump also managed to catch Netanyahu off-guard, at one point saying that if a solution to the Israel-Palestinian conflict was going to be reached "both sides will have to make compromises". The president then turned to Netanyahu and said: "You know that, right?" Netanyahu looked momentarily startled and replied with a chuckle, "Both sides."
The two leaders agreed that there was an opening for enlisting Israel's Arab neighbors - who share its concerns about Iran - into any future peace process, though they offered no specifics on how that could be done.
Palestinians alarmed
Palestinians reacted with alarm to the possibility that Washington might ditch its support for an independent Palestinian nation.
"If the Trump administration rejects this policy it would be destroying the chances for peace and undermining American interests, standing and credibility abroad," Hanan Ashrawi, a senior member of the Palestine Liberation Organization, said in response to the U.S. official's remarks.
"Accommodating the most extreme and irresponsible elements in Israel and in the White House is no way to make responsible foreign policy," she said in a statement.
Husam Zomlot, strategic adviser to Palestinian President Mahmoud Abbas, said the Palestinians had not received any official indication of a change in the U.S. stance.
The one-state idea that Trump referred would be deeply problematic for both sides. One concept would be two systems for two peoples, which many Palestinians would see as apartheid. Another version would mean equal rights for all, including for Palestinians in an annexed West Bank, but that would compromise Israel's Jewish character.
For Netanyahu, the talks with Trump are an opportunity to reset ties after a frequently combative relationship with Democrat Barack Obama, Trump's predecessor. After speaking to reporters, the two leaders were due to hold talks in the Oval Office followed by a working lunch.
The prime minister, under investigation at home over allegations of abuse of office, spent much of Tuesday huddled with advisers in Washington preparing for the talks. Officials said they wanted no gaps to emerge between U.S. and Israeli thinking during the scheduled two-hour Oval Office meeting.
Trump, who has been in office less than four weeks and has already been immersed in problems including the forced resignation of his national security adviser earlier this week, brings with him an unpredictability that Netanyahu's staff hope will not impinge on the discussions.
The two leaders, who seemed to strike up an emerging "bromance" in social media exchanges since the election, sought to demonstrate good personal chemistry face-to-face as well, both sporting smiles and exchanging asides.
Meetings with Obama were at best cordial and businesslike, at worst tense and awkward. In one Oval Office encounter in 2011, Obama grimaced as Netanyahu lectured him in front of the cameras on the suffering of the Jewish people through the ages.
