Washington ? The U.S. and Israel failed to heal their deepest dispute in decades as a two-day visit by Israeli Prime Minister Benjamin Netanyahu ended late Wednesday without resolving a rift over new Israeli housing planned in east Jerusalem.

Before departing the U.S., Netanyahu said he thought some progress had been made in defusing what has become an unusually public spat between close allies.

“I think we have found the golden path between Israel’s traditional policies and our desire to move forward toward peace,” the Israeli leader said as he boarded his plane for the trip home.

American officials said last-minute talks between Netanyahu and U.S. Mideast peace envoy George Mitchell had not ended tensions over Israeli construction in the part of Jerusalem that Palestinians want to be a capital of a separate state.