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RAMALLAH, WEST BANK — Saying the time has come for a Palestinian state, Secretary of State Condoleezza Rice prodded Israel and the Palestinians on Monday to agree at a U.S.-sponsored conference this fall on how and when to start formal peace talks.

In one of her strongest statements on the issue, Rice declared that a Palestinian state is a key U.S. interest and urged both sides to drop contentious demands and reach consensus on a substantive joint statement ahead of the international conference.

“Frankly, it’s time for the establishment of a Palestinian state,” Rice told a news conference with Palestinian Authority President Mahmoud Abbas, whom she saw on the second of a four-day intense Middle East shuttle diplomacy mission.

“The United States sees the establishment of a Palestinian state and a two-state solution as absolutely essential for the future, not just of Palestinians and Israelis but also for the Middle East and indeed to American interests,” she said.

“That’s really a message that I think only I can deliver,” Rice said, explaining her task to prepare for a conference in Annapolis, Md., as early as late November.

The secretary is facing daunting challenges in trying to bring the sides close enough to make the conference worthwhile.

Rice, who expects to return to the region at least once before the conference, played down the chances for any breakthroughs before she traveled to the Mideast.

In her talks in Jerusalem and the West Bank, she is seeking to bridge wide gaps between Israel and the Palestinians over the declaration to be endorsed in Annapolis that President Bush hopes will lead to negotiations for a final settlement of the long- running conflict.

Israeli Prime Minister Ehud Olmert has said he does not see the document as a prerequisite for the conference. He wants it as vague as possible on critical “final status issues” like the borders of a Palestinian state, the status of disputed Jerusalem, Israeli settlements and Palestinian refugees.

The Palestinians, meanwhile, have said they will not attend the conference without a document that contains details on these matters as well as a specific timeline for their resolution.

Arab states share the Palestinian concerns.

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