"Looking at two-state or one-state, I like the one that both parties like. I'm very happy with the one both parties like. I can live with either one," Trump told reporters at a press conference with Israeli Prime Minister Benjamin Netanyahu in Washington.

His statement marks a departure from a long-held Washington’s commitment to a two-state solution also backed by the European Union.

"The United States will encourage a peace and really a great peace deal ... We will be working on it very, very diligently. But it is the parties themselves who must directly negotiate such an agreement," Trump also said.

The US President said that his administration was working to move the US embassy in Israel from Tel Aviv to Jerusalem.

"I would like to see that happen. We are looking at it very very strongly. We are looking at it with great care. Let's see what happens."

Netanyahu said that he wanted to focus on "substance" and not "labels," when asked by Israeli journalists about his support for a two-state solution.

"There are two prerequisites for peace. First, the Palestinians must recognise the Jewish state. Second, in any peace agreement, Israel must retain the overriding security control over the entire area west of the Jordan River," he said.