"Obviously a lot of hard work is going have to be done, it's not going to be easy, but we haven't changed our objective" set in August of reaching a peace agreement within 12 months, he said.
US officials had conceded Tuesday that the Obama administration's weeks-long efforts to coax Israel into imposing new curbs on West Bank settlement construction have failed, leaving direct peace talks deadlocked.
"Our position on settlements has not and will not change," Crowley said. "The United States does not accept the legitimacy of continued Israeli settlements and we will continue to express that position."
The Palestinians say they will not negotiate while Jewish settlers build on land they want for a future state.
Palestinian leader Mahmud Abbas has insisted not only on a settlement freeze in the West Bank, but also in east Jerusalem, which Palestinians want for their capital.
President Barack Obama presided over the relaunch of direct negotiations in Washington in September, only to see them stall within weeks when a settlement moratorium expired and the Palestinians refused to come back to the table.
Crowley said US Middle East envoy George Mitchell was due to return to the region next week in hopes of reviving the peace talks.
He added that senior Israeli and Palestinian representatives may also come to Washington to discuss ways to advance the peace process, but conceded it was unlikely they would meet in the same room.
Palestinian officials said that their chief negotiator Saeb Erakat would meet US Secretary of State Hillary Clinton in the next 48 hours in Washington.
Israeli Defense Minister Ehud Barak was also travelling to Washington for "meetings with senior US defense and administration officials," his office said.
In an attempt to revive direct talks, the United States had offered Israel a package of incentives including 20 F-35 fighter planes, worth three billion dollars (2.3 billion euros), in exchange for a new three-month ban.
Washington also committed not to seek an additional freeze and pledged to provide Israel with diplomatic support, including vetoing anti-Israel resolutions at the United Nations.
The package would also have allowed Israel to continue building in east Jerusalem, over the objections of the Palestinians.
Asked if the incentives were still on the table, Crowley replied: "That is not under discussion at this time."
Crowley threw cold water meanwhile on Palestinian appeals for the international community to go ahead and recognize a Palestinian state within the borders that existed before the 1967 Arab-Israeli war.
"We believe that bringing these issues to an international forum will be a distraction, and will just add complexity to an already difficult circumstance," Crowley said.