US President Barack Obama on Tuesday urged the global community to overcome old prejudices and take the risks needed to help reach a peace deal between Israel and the Palestinians.

"The time is now ripe for the entire international community to get behind the pursuit of peace. Already, Israeli and Palestinian leaders have demonstrated a willingness to take significant political risks," he told the UN General Assembly.

Two years after Palestinian president Mahmud Abbas made a powerful plea to the annual UN summit to grant his people statehood, Obama said the United States remained "determined to resolve a conflict that goes back even further than our differences with Iran: the conflict between Palestinians and Israelis."

The Middle East peace process was relaunched in July after almost three years of stalemate.

US Secretary of State John Kerry spent months doggedly shuttling back and forth to persuade the two sides to return to the negotiating table.

With the guidance of newly appointed US special envoy Martin Indyk, Israeli and Palestinian negotiators have been meeting in secret to hammer out some of the thorniest issues standing in the way of a deal to create two states, living side-by-side.

In September 2011, Abbas handed over a formal request for Palestinian statehood to UN chief Ban Ki-moon, and triggered wild applause as he addressed the UN General Assembly, vowing the Palestinians were ready to return to peace talks if Israeli settlement activities cease.

But the dramatic move was immediately rejected by Israel and the United States.

Obama, who was due to meet with Abbas later Tuesday on the sidelines of the UN summit, praised the Palestinian leader for having now put aside efforts "to short-cut the pursuit of peace and come to the negotiating table."

He also hailed Prime Minister Benjamin Netanyahu's release of Palestinian prisoners and said the "current talks are focused on final status issues of borders and security, refugees and Jerusalem."

"Now the rest of us must also be willing to take risks," Obama insisted.

"Friends of Israel, including the United States, must recognize that Israel's security as a Jewish and democratic state depends upon the realization of a Palestinian state," Obama said in his address.

"Arab states - and those who have supported the Palestinians - must recognize that stability will only be served through a two-state solution with a secure Israel."

"All of us must recognize that peace will be a powerful tool to defeat extremists, and embolden those who are prepared to build a better future," he said.

"So let us emerge from the familiar corners of blame and prejudice, and support Israeli and Palestinian leaders who are prepared to walk the difficult road to peace."

Kerry was to meet with Abbas later Tuesday, after first holding separate talks behind closed doors with the chief Palestinian negotiator Saeb Erakat.

The top US diplomat has insisted that the nitty-gritty of the negotiations, in which he has invested so much time and energy, should remain confidential to prevent leaks which could torpedo the chances of reaching a deal with suspicion and distrust running high on both sides.

Abbas, who will address the UN on Thursday, also met Tuesday with UN chief Ban Ki-moon and they discussed "the role that the international community could play in support of the Middle East peace process in order to make tangible political progress towards the realization of the two-state solution," Ban's office said in a statement.

They also discussed "the vital need for the international community to unite to bolster the fiscal standing of the Palestinian Authority," the statement added.

Kerry's team, in conjunction with the Middle East Quartet, is working on an economic plan to attract some $4 billion in private investment to help shore up the Palestinian economy by investing in sectors such as technology, housing construction and tourism.