Peace talks between Israel and the Palestinians resumed in September after a break of almost two years.
But they were suspended within weeks when Israel decided not to extend the 10-month freeze on settlement building in the West Bank.
Ms Clinton said the time had come to "grapple with the core issues of this conflict: on borders and security, settlements, water and refugees and on Jerusalem itself."
She was making her first comments on the deadlock since Washington said it had abandoned efforts to persuade Israel to stop the construction of new Jewish settlements - something which the Palestinians are insisting on before direct talks can progress.
'Pushing core issues'
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“Start Quote
End Quote Hillary Clinton US Secretary of StateThere is no viable alternative to reaching mutual agreement. The stakes are too high, the pain too deep, and the issues too complex”
- Obstacles to peace: Borders and settlements
Ms Clinton repeated the US commitment to Israel's security, even as she explained why the US viewed Israel's construction of Jewish settlements on Palestinian land as illegitimate.
"Like many of you, I am frustrated that we have not gotten farther, faster," Ms Clinton said in a speech at the Saban Forum, a Middle East policy seminar sponsored by the Brookings Institution think tank.Stressing that a negotiated solution remained the only way forward, she said the US would resume the role of broker, opening talks with both parties on vital issues
"We will push the parties to lay out their positions on the core issues without delay, in good faith, and with real specificity," she said.
Ms Clinton's speech was the first Middle East policy address following the US's abandoning its efforts to persuade Israel to halt construction of Jewish settlements in the West Bank.
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Ms Clinton's speech laid bare the frustrations of the Obama administration about peace making in the Middle East.
In September, Mr Obama and Mrs Clinton said a solution to the core problems could be found within a year. Mrs Clinton made no mention of that timeline.
Clearly, Washington has given up on trying to get somewhere fast but Mrs Clinton insisted the US had not given up completely.
She said America was serious about peace and both sides wanted the US to be involved. She said the last two rounds of direct talks had produced some progress which could be built on in the next phase.
US officials will now be shuttling between the two sides for indirect talks about substance - despite Prime Minister Benjamin Netanyahu's preference for direct talks. Clinton also said the US would help bridge the gaps "when appropriate" - in other words the US is hinting the time may come when it'll put its own plan on the table, but not just yet.
Analysis
In September, Mr Obama and Mrs Clinton said a solution to the core problems could be found within a year. Mrs Clinton made no mention of that timeline.
Clearly, Washington has given up on trying to get somewhere fast but Mrs Clinton insisted the US had not given up completely.
She said America was serious about peace and both sides wanted the US to be involved. She said the last two rounds of direct talks had produced some progress which could be built on in the next phase.
US officials will now be shuttling between the two sides for indirect talks about substance - despite Prime Minister Benjamin Netanyahu's preference for direct talks. Clinton also said the US would help bridge the gaps "when appropriate" - in other words the US is hinting the time may come when it'll put its own plan on the table, but not just yet.
Using plain language and a sometimes stern tone, she said America was "serious about peace" and would be "persistent" in its search for a solution.
Two years of preaching about the need for negotiations had not changed anything, Mrs Clinton said: "There is no viable alternative to reaching mutual agreement. The stakes are too high, the pain too deep, and the issues too complex for any other approach."Both Israel and the Palestinians had clear motives for seeking peace, she said, explaining that without a resolution to the conflict, Israelis could become a minority within their current borders and Palestinians would be unable to sustain "the lack of peace and the occupation that began in 1967".
But she had some stark words for political leaders on both sides.
The land between the Jordan River and the Mediterranean Sea was "finite", she said, and the people who live there need a clear border to map out their futures.
"Palestinians must appreciate Israel's legitimate security concerns. And Israelis must accept the legitimate territorial aspirations of the Palestinian people. Ignoring the other side's needs is in the end self-defeating."
Mr Obama has identified continued US engagement in peace talks as a key policy goal.
But the Palestinians have vowed not to return to the negotiating table while Israel continues building on West Bank settlements.
Last month the Obama administration offered Israel a sizeable package of incentives, including jet fighters and security guarantees, in return for a 90-day extension of a previous moratorium on settlement-building.
Israeli Prime Minister Benjamin Netanyahu offered to renew the freeze if the Palestinians recognised Israel as a Jewish state, but the Palestinian Authority dismissed the idea.
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