Washington ? The United States and Israel stepped back Tuesday from their deepest rift in decades, a dispute over new Jewish homes in a traditionally Arab part of Jerusalem that quickly became a test of U.S. and Israeli commitment to peace talks and one another.

Secretary of State Hillary Rodham Clinton said U.S. and Israeli officials are in intense talks about resuming peace negotiations, moving past the breach opened when Israel announced last week, during a visit to Jerusalem by Vice President Joe Biden, that it will build 1,600 more Jewish houses in east Jerusalem.

Israeli officials privately say Prime Minster Benjamin Netanyahu — Washington-bound next week — is willing to go to some lengths to calm tensions. U.S. officials are also looking for a way to finesse their demand that Israel cancel the construction.

There is no obvious half-measure, and both countries are wary of looking weak to the other, to important political constituencies at home and to the Arab world. Still, the rhetoric from both capitals suddenly softened.

“We have a close, unshakable bond between the United States and Israel and between the American and Israeli people,” Clinton said. “We share common values and a commitment to a democratic future for the world and we are both committed to a two-state solution. But that doesn’t mean that we’re going to agree.”

Clinton has been the leading voice of U.S. outrage over the episode, which embarrassed Biden and called into question Israel’s stated willingness to resume talks with the United States as an intermediary. She has called the announcement an insult and dressed down Netanyahu by telephone last week.

The United States wants to see a gesture from Israel to the Palestinians and a statement that the biggest issues dividing those two parties, including the fate of Jerusalem, will be on the table for talks.

“Israel appreciates and values the warm words of Secretary of State Clinton about the deep ties between Israel and the U.S. and the commitment of the U.S. to Israel’s security,” government spokesman Mark Regev said in Jerusalem. “Concerning the commitment to peace — Israel’s government has proved over the past year its commitment to peace, in words and in deeds.”

For President Barack Obama, the unusually public fight tests his willingness to take Israel to task in the name of Mideast peace, even if it means angering some powerful political forces whose support is necessary to further his domestic agenda. For his part, Netanyahu is left to choose between his desire to populate east Jerusalem with Jews and his need not to alienate his all-important U.S. ally.

Netanyahu’s looming visit leaves little time to paper over the rift. If Netanyahu gets a cold shoulder, he has little incentive to scrap settlements the United States sees as an affront to peace talks.

If he skips the trip entirely, the Obama administration risks a backlash from the pro-Israel lobby and its congressional backers, many of whom think Washington has already taken the spat too far.

The dispute exposed tensions that have been simmering between the two allies since the election of a liberal-minded U.S. administration and a right-leaning Israeli government more than a year ago. The United States views the housing expansion as a deliberate complication to an eventual peace deal.

Palestinians want east Jerusalem to be the capital of an eventual independent state.

“Though we differ on certain issues, our discussions are being conducted in an atmosphere of cooperation as befitting long-standing relations between allies,” Israel’s ambassador to Washington, Michael Oren, said Tuesday night. “I am confident that we will overcome these differences shortly.”

Netanyahu on Tuesday ordered his ministers and spokespeople not to talk publicly about the building plan.