Mr Netanyahu ceded little ground to Hillary Clinton, the US secretary of state, as he finally responded to a series of conditions she set out to end a 10-day standoff between Israel and its superpower patron.
The Israeli leader gambled that the Obama administration had lost its appetite for a prolonged diplomatic row by accepting just one of Mrs Clinton's demands in full as he agreed to make a "confidence-building" gesture to the Palestinians.
He refused to cancel construction of 1,600 settler homes which lie at the heart of the crisis, offering instead to delay their construction - a proposal understood already to have been made and rejected.
A freeze on further settlement building in East Jerusalem, captured by Israel in 1967, was also ruled out. Instead, he reportedly proposed to continue building, but in secret.
In keeping with a decision to soften the tone of US rhetoric, Mrs Clinton was guarded in her response, neither welcoming nor dismissing Mr Netanyahu's suggestions.
"What I heard from the prime minister in response to the requests we made was useful and productive," she said, speaking after a meeting of the Middle East Quartet negotiating group in Moscow.
The Quartet - which comprises the United States, the United Nations, Russia and the European Union - however joined Mrs Clinton in forcefully condemning Israel's construction plans.
After the Quartet released a statement notable for its strongly-worded language, Sergei Lavrov, the Russian foreign minister, appeared to warn Israel it must comply with international demands.
"We are convinced that Israel will hear this and understand it in the right way. We will use all means at our disposal to get Israel and the Palestinians talking."
Mr Netanyahu's response averted the prospect of a major snub when he visits Washington to address America's largest pro-Israel lobby group next week after it was confirmed that he will be invited for talks with both Mrs Clinton and President Barack Obama.
But according to a diplomatic source, Mr Netanyahu would be wrong to assume that he had succeeded in forcing the president to back down.
"Netanyahu thinks that Obama has blinked, but he's wrong," the source said. "This is not over yet."
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