Egyptian President Hosni Mubarak and his Israeli counterpart Shimon Peres on Sunday acknowledged differences over the contentious issue of Jerusalem, after talks in Cairo.
"I don't deny there are differences in our positions, but I believe they are bridgeable," Peres told reporters after the talks.
He said Jerusalem was under Israeli sovereignty and any change in the status quo had to come through negotiations.
Israel views all of Jerusalem as its "unified, eternal" capital, but the international community has never recognised its claim to east Jerusalem, which the Palestinians have demanded as the capital of their future state.
The fate of east Jerusalem, which Israel occupied in the 1967 Six Day War and later annexed, is one of the thorniest issues at the heart of the Israeli-Palestinian conflict.
"Jerusalem is not only a Palestinian problem but it is an issue that concerns all Muslims around the world," Mubarak said.
"If we don't find a solution to Jerusalem... Israel will make enemies of all Muslims around the world.
"I have stressed on this issue because we want Jerusalem to be one of the topics discussed at the negotiating table," Mubarak said.
The administration of US President Barack Obama has been struggling in vain for months for the two sides to resume peace negotiations that were suspended during the Gaza war at the turn of the year, amid deep disagreement on the thorny issue of Jewish settlements on occupied Palestinian land.