The US State Department has rejected Israel's strategy of keeping some army forces on the outskirts of Palestinian-controlled territory.
It also does not support Israel's demand that the Palestinians surrender suspects in terror attacks. The department wants a total withdrawal from the West Bank.
Spokesman Mr Richard Boucher said Mr Yasser Arafat's Palestinian Authority claims jurisdiction over the wanted men, and it is up to the two sides to work out a settlement.
The department's position is further evidence that the Bush administration is taking a more neutral stance between the Israelis and Palestinians.
US President Mr Bush's chief of staff, Mr Andrew Card, told more than 4,000 members of a pro-Israel lobbying group that "real sacrifices by all sides" are required to achieve peace.
Mr Bush's principal goals are an end to terror and a future of two states, Israel and Palestine, living side-by-side in peace, he said.
US Senate Majority Leader Mr Tom Daschle told the American Israel Public Affairs Committee (AIPAC) the Senate would stand by Israel. "Israel has always had fair-weather friends. What it needs now are foul-weather friends," Mr Daschle said.
Former Israeli Prime Minister Mr Benjamin Netanyahu told AIPAC at its dinner last night that he advised Mr Sharon to "get rid of Arafat; get rid of that regime. As long as he is there, terrorism will not stop".
PA