Mitchell has proposed US-brokered indirect talks as a way of getting around a deadlock, with negotiations on ice since Israel launched a devastating attack on the Gaza Strip in December 2008.
"We've been working hard in the region for several months to create the kind of political support that the parties will need if they make the decision to enter into discussions," State Department spokesman PJ Crowley said after the Arab League backed indirect US-mediated negotiations.
Middle East analysts said the reopening offers a chance for a potential breakthrough, but also ups the pressure on Washington to deliver.
"The US is going to have to be the catalyst that actually says to both sides: 'This is what you will have to give up,'" Amjad Atallah of the New America Foundation told AFP.
Even before the Arab foreign ministers gave their green light on Wednesday for the talks, Palestinian president Mahmud Abbas said he would abide by the decision.
"The bigger challenge will be defining practical and achievable objectives for those talks that have an impact on the strategic environment," said Haim Malka of the Center for Strategic and International Studies.
In one sign that the talks will renew a commitment by President Barack Obama's administration to resolving the conflict, Vice President Joe Biden is due in Israel and the Palestinian territories next week.
Secretary of State Hillary Clinton, meanwhile, has laid the ground work with Russian Foreign Minister Sergei Lavrov for a March 19 meeting in Moscow of the Middle East Quartet, which groups the two former Cold War foes with the European Union and the United Nations.
According to the Israeli daily Maariv, the new US peace plan foresees the two sides immediately relaunching final status talks on the thorniest issues that have plagued the conflict.
To entice both sides to agree to the deal, Washington is drafting letters of guarantee. If the talks flounder, the Palestinians will ask for US backing that they be granted a territory equal to the area under Arab rule prior to the Six-Day War in 1967.
Israel, meanwhile, could be allowed to keep its major settlement blocks.
But there are few indications that either the Palestinians or the Israelis are prepared to make concessions to clinch a deal that has eluded sucessive US governments for decades.
George Washington University professor Nathan Brown hailed the Obama administration's "achievement" in getting the Arab League's backing for the talks.
"That said, the basic ingredients for progress simply are not there. Convening talks even if they are proximity talks between an isolated Palestinian leadership and a right-wing Israeli government is an accomplishment, but neither side has the ability to move anywhere," he noted.
"This appears a bit too much like the Annapolis process, diplomacy for the sake of diplomacy," referring to a Middle East peace conference launched by former US president George W. Bush in 2007 that yielded little progress and was soon forgotten.
While hawkish Israeli Prime Minister Benjamin Netanyahu swiftly welcomed the prospect of new talks, it was slammed by the Islamist Hamas movement that controls the Gaza Strip as an "excuse" for Abbas to rejoin negotiations that would "only lead to failure."
The US effort will also be complicated by the four-month limit imposed by the Arab League, which coincides with the end of Israel's 10-month freeze that excludes public buildings and annexed Arab east Jerusalem.
Yet the costs of failure are "too high," Atallah said.
"Hamas would be stronger than ever, the arguments against a third intifada (Palestinian uprising) would be weaker than ever, the Arab League would step back further from believing that the US can actually broker a deal."
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