The Palestinian President and his aides have rejected Binyamin Netanyahu's proposal for a two-state solution in which some settlements would end up outside Israel's borders as part of a wider compromise reflecting "the dramatic demographic changes that have occurred since 1967".

In a well-received address to a joint session of the US Congress on Tuesday, the Israeli Prime Minister vowed to be generous about the size of a future Palestinian state. He said Israel was willing to make "painful compromises" to achieve peace.

But at a meeting of the Palestine Liberation Organisation in Ramallah, Mr Abbas said Mr Netanyahu had offered "nothing we can build on".

And despite the statement by US President Barack Obama that a unilateral declaration of Palestinian statehood at the UN in September would not succeed, Mr Abbas said he would continue with this plan if no breakthrough in negotiations was achieved by then.

An aide to Mr Abbas also criticised Mr Netanyahu for insistence that Israel would not return to the exact 1967 borders. Nabil Shaath called this a "declaration of war against the Palestinians."

A spokesman for Mr Abbas, Nabil Abu Rdeneh, added: "What Netanyahu said in his speech tonight …put more obstacles in the path of peace."

Mr Netanyahu's comments on the future of the West Bank – seen as a bigger concession than any he had made in the past - drew criticism from right-wing groups in Israel.

But in the US, the Jewish anti-extremism group the Anti-Defamation League praised Mr Netanyahu for "reiterating Israel's commitment to negotiating a lasting peace with the Palestinians with the goal of two states for two peoples".