Donald Trump has dropped America's long commitment to a two-state solution as the key to peace between Israelis and the Palestinians.
The US President said he wanted both sides to make compromises but it was up to Israel and the Palestinians themselves to decide what kind of a deal they should have.
He said: "I'm looking at two state and one state and I like the one that both parties like. I'm very happy with the one that both parties like.
"I thought for a while the two state looked like the slightly easier of the two, but if Bibi (Netanyahu) and the Palestinians are happy, I'm happy with the one they like the best."
:: A bromance and a dead two-state solution
He later added: "The Israelis are going to have to show some flexibility, which is hard, hard to do. They are going to have to show they really want to make a deal.
"I think the Palestinians have to get rid of some of that hate that they are taught from a very young age. Tremendous hate. I've seen what they are taught. It starts in the school room."
Israeli Prime Minister Benjamin Netanyahu, who was visiting the White House for talks, said that rather than deal with labels like "two state", he wanted a deal with "substance".
He said: "Here's the substance. There are two prerequisites for peace that I laid out. They haven't changed. First, the Palestinians must recognise the Jewish state.
"Second, in any peace agreement, Israel must retain the overriding security control over the entire area west of the Jordan river."
Mr Netanyahu also said he wanted "change" but said it could not happen until the Palestinians recognised Israel's requirements.
Both hinted that discussions were already underway to achieve a "bigger deal" with the involvement of "Arab partners" and "many many countries".
The US President said he wanted to see the US embassy move to Jerusalem but his administration were looking at it with "great care". "We'll see what happens," he said.
Sky's US Correspondent Cordelia Lynch said: "This press conference demonstrated potentially massive departure from decades of US foreign policy... when he said he could live with or without a two-state deal."
The President and his wife Melania had earlier given a warm welcome to the Israeli PM and his wife Sara when they arrived at the White House, with both putting their arms around their guests.
The President told the Prime Minister he would like to see him "hold back" on settlements in the Palestinian territories and during his opening comments, Mr Trump attacked the United Nations and said it had treated Israel "very, very unfairly".
And he said he will do more to prevent Iran "ever" developing a nuclear weapon. "And I mean ever," he added.
The Palestinian presidency reacted by stressing its commitment to the two-state solution and "ending Israeli occupation" but affirmed its readiness to deal positively with Mr Trump's administration to make peace.
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