Not only did he say that the only solution to the problem was to form two states, side-by-side, but he referred twice to a would-be state as "Palestine," a term American politicians usually avoid, instead preferring terms like "the Palestinians" or "The Palestinian Authority."
Mr. Obama also said that the US could not accept the "legitimacy" of continued Israeli settlement building, using much stronger language than previous administrations.
Significantly, he referred to Hamas, the Palestinian political and militant group now in charge of a Gaza, in a very different tone than that used by the US and Israel in previous years. He suggested that the group – which is on the US State Department’s “terrorist” list – shift gears and assume its "responsibilities." But he did not call for the group's destruction or call it a terrorist group.
“The only resolution is for the aspirations of both sides to be met through two states, where Israelis and Palestinians each live in peace and security,” Obama said, setting off a ripple of applause. “That is in Israel's interest, Palestine's interest, America's interest, and the world's interest.”
Obama was also made a clear and bold statement against the expansion of Jewish settlements in the West Bank, the territory where about 250,000 Israelis now live and where Palestinians expect to build their future state. The Obama administration has been at odds in recent days with the Israeli prime minister, Benjamin Netanyahu, who has rejected calls for a settlement freeze.
"At the same time, Israelis must acknowledge that just as Israel's right to exist cannot be denied, neither can Palestine's," Obama said. "The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop."
Settlers react to the speech
The Israeli settlers' movement reacted to Obama's speech by blaming it on the "defeatism" of previous Israeli leaders who "capitulated" in peace talks.
"Today, the State of Israel is paying the price of its leaders' defeatism," Yesha Council, the settlers' lobby, said in a statement. "Hussein Obama gave priority to Arab lies, which have always been told with determination and daring, at the expense of the Jewish truth, which has been said in a weak and unconfident voice."
Israeli peaceniks respond
Peace activists, on the contrary, took heart at Obama's speech.
"As an Israeli, I'm enthusiastic about him paving a clear road towards peace, setting out clearly that what we aim for is a two-sate solution and an end to settlements," says Uri Avineri, the founder of Gush Shalom (Peace Bloc).
"Also, he included Hamas in the new order, speaking about them respectfully, and without threats, and yet demanding what has to be demanded, but clearly indicating that the US would accept a Palestinian unity government with Hamas in it."
Obama said in his speech that Hamas "does have support among some Palestinians, but they also have responsibilities." He called on the group to unify the Palestinian people – a call to reconcile with Fatah – and to end violence, "recognize past agreements, and recognize Israel's right to exist."
Mr. Avineri noted that these words were bolder and more explicit than many people expected. "What has to be stressed is that Obama has outlined a vision for a world that is totally different from the world Netanyahu lives in. And while the former US president tried to paper over these differences by empty phrases, Obama's trying to bring it out in the open."
Official Palestinian comment
"His call for stopping settlement and for the establishment of a Palestinian state, and his reference to the suffering of Palestinians ... is a clear message to Israel that a just peace is built on the foundations of a Palestinian state with Jerusalem as its capital," said the spokesman, Nabil Abu Rudeineh.
Other reactions around the world