Outgoing Prime Minister Ehud Olmert warned on Friday that it would not be possible to reach a peace accord with the Palestinians if Israel did not cede part of Jerusalem to them.
"There won't be peace if part of Jerusalem does not become the capital of the Palestinian state," said Olmert, speaking at Kibbutz Yifat in the Galilee.
During Israeli-Palestinian peace talks that were relaunched in 2007, though are currently stalled, the Fatah-controlled Palestinian Authority demanded parts of Jerusalem as the capital of a future state.
The prime minister's comments came after Palestinian militants in Gaza fired a mortar round into the western Negev on Friday. The attack caused no casualties.