Israeli Prime Minister Binyamin Netanyahu’s three-day visit to London ended on an optimistic note after four hours of talks with President Obama’s special envoy to the Middle East, George Mitchell.

A framework for resumed peace negotiations between Israel and the Palestinians is expected to be announced “between Rosh Hashanah and Yom Kippur”, according to Israeli sources. This will almost certainly be at the UN General Assembly session in New York. Before that, Israeli officials are expected to hold further talks with Mr Mitchell next week.

Israeli spokesman Mark Regev emphasised that the involvement of the Arab world was crucial to the success of any peace settlement. The Arab Peace Initiative, he said, was “significant as a basis for dialogue”. But he made clear that Israel rejected it as a dictate of a future settlement.

A senior source close to Mr Netanyahu said that although President Obama’s desire for a full regional settlement was “an interesting new approach”, there are no plans yet for renewed negotiations between Israel and Syria or Lebanon.

Israel has agreed, it is thought, to freeze outward growth in the settlements in return for what Hillary Clinton called in April “crippling sanctions” against Iran.

The Israelis believe that the behaviour of the Iranian regime after the presidential elections has aided the cause of sanctions, as well as making Arab involvement in a peace deal more likely.

The senior Israeli source said: “The world now knows what the world would look like with a nuclear-armed Iran. It’s very late in the game, but not too late. We prefer [sanctions] as the course of action… Iran is a lot weaker and the West a lot more powerful than most people think.”

Israeli President Shimon Peres met Russian President Dmitry Medvedev last week and has reported to the Israeli government that there are grounds for believing that Russia may not veto sanctions. If Russia accedes to sanctions, China is expected to follow.

Mr Netanyahu met community leaders, including Board of Deputies president Vivian Wineman and Baroness Deech, on Tuesday before discussions in Downing Street with Gordon Brown. Hundreds of protestors, some waving “Free Palestine” placards, greeted the Israeli leader, but Conservative leader David Cameron broke off from his holiday for a 15-minute phone conversation with Mr Netanyahu.

According to Mr Regev, Mr Netanyahu told them that all sides “had to learn from previous mistakes in peace negotiations”. Peace talks had to be both “bottom down” when it came to international involvement, and “top up” when it came to improving the day-to-day lives of Palestinians.

The three main tracks of the negotiations would focus on improvements “politically, economically, and in terms of security”.

Mr Regev stressed that the settlements were “a final-session issue which will be negotiated with the Palestinians. We have said that there will be no new settlement building, no expropriation of land for existing settlements, but that normal life should be allowed to continue inside the existing settlements.”