The President has made the issue a cornerstone of his evolving foreign policy, and cajoled Israeli Prime Minister Benjamin Netanyahu and Palestinian president Mahmoud Abbas to join him at a summit last month in New York.
But despite the efforts of Obama, Clinton and Middle East envoy George Mitchell, the administration has had few breakthroughs to savor, and Israelis and Palestinians seem as estranged as ever.
"The secretary advised the president that challenges remain as the United States continues to work with both sides to relaunch negotiations in an atmosphere in which they can succeed," an Obama administration official said.
Clinton did stress that some minor progress had been achieved, but added that much work needed to be done by both sides, the official said, on condition of anonymity.
"The Palestinians have strengthened their efforts on security and reforming Palestinian institutions, but they need to do more in these areas and on stopping incitement and preventing terror," the official said.
"Israelis have facilitated greater movement for Palestinians and responded to our call to stop all settlement activity by expressing a willingness to curtail settlement activity.
"But they need to translate that willingness into real, meaningful action and do more to improve the daily lives of Palestinians. And both sides need to move forward toward direct negotiations."
The official said that Mitchell will return to the Middle East in the near future to continue talks, while Clinton would consult Arab foreign ministers in Morocco on November 2 and 3.
Obama has been trying to get Netanyahu's hawkish government to agree to a complete freeze on settlement expansion on the occupied West Bank, and for the Palestinians to take steps to improve Israeli security.
Divisions between Palestinians, namely Abbas's Fatah party which controls the West Bank, and militant group Hamas which runs the Gaza Strip, are also complicating the situation.
Arab states have also so far rebuffed Obama's call to make concessions -- such as the overflight of their territory by Israeli civilian aircraft -- to improve the atmosphere for peacemaking.
Another senior official said on condition of anonymity that there had been "some progress" in the quest to get Israelis and Palestinians back together, but admitted "I wouldn't say that a deal is close."
At Clinton's State Department, spokesman Ian Kelly noted recent optimism expressed by Israeli officials over the prospect of talks: "I hope that's true," he said.
Earlier on Thursday, US ambassador to the United Nations Susan Rice made a quiet visit to the West Bank, a day after she gave a speech in Israel denouncing international "anti-Israel vitriol."
Rice held closed-door meetings with Palestinian prime minister Salam Fayyad and Yasser Abed Rabbo, a senior official in the Palestine Liberation Organisation (PLO), but did not make any public statements.
On Thursday, at a Jerusalem conference organized by Israeli President Shimon Peres, Rice called on UN members to "replace anti-Israeli vitriol with recognition of Israel's legitimacy and right to exist in peace and security."
She made no direct mention of the controversial UN report on the Gaza war, authored by South African former international war crimes prosecutor Richard Goldstone, which concluded that both Israel and Hamas committed war crimes and possible crimes against humanity.
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