June 14 (Bloomberg) -- Israeli Prime Minister Benjamin Netanyahu would accept a Palestinian state alongside Israel if it is demilitarized, an official told reporters.

Netanyahu, in a policy speech at Bar Ilan University outside of Tel Aviv, will also condition his support of the state on Palestinian acceptance of Israel as a Jewish state and international guarantees that the state will be demilitarized, the official said, speaking on condition of anonymity.

Sufian Abu Zaydeh, a leader in Palestinian Authority President Mahmoud Abbas’s Fatah party, said today in an interview on Israel Army Radio that recognition of Israel as a Jewish state was not on the Palestinian government agenda.

Netanyahu’s speech comes 10 days after President Barack Obama, in a address to the Muslim world, said Israel must halt construction in West Bank settlements and that the creation of a Palestinian state was the “only resolution” for the Arab- Israeli conflict.

To contact the reporter on this story: Tal Barak Harif in Tel Aviv at tbarak@bloomberg.netGwen Ackerman in Jerusalem at gackerman@bloomberg.net

Last Updated: June 14, 2009 13:05 EDT