Israeli Prime Minister Benjamin Netanyahu has watered down a pre-election vow not to allow the establishment of a Palestinian state.
In a US TV interview, Mr Netanyahu said he wanted a two-state solution, but said "circumstances have to change".
The interview with MSNBC was his first since winning a clear election victory earlier this week.
As the campaign ended Mr Netanyahu had appealed to supporters by saying he would not allow a Palestinian state.
But that view was tempered in Thursday's interview, in which he also denied accusations that another last-minute campaign pronouncement amounted to racism.
"I don't want a one-state solution. I want a sustainable, peaceful two-state solution, but for that circumstances have to change," Mr Netanyahu told MSNBC.
"I never changed my speech in Bar Ilan University six years ago calling for a demilitarised Palestinian state that recognises the Jewish state. What has changed is the reality," he said.
Mr Netanyahu's campaign comments - and a speech he made to the US Congress earlier this month - were widely seen to have soured relations between Israel and the Obama administration.
However, on Thursday, the White House said President Barack Obama had called Mr Netanyahu to congratulate him on his victory.
In his interview, Mr Netanyahu cited as a sticking point Palestinian leader Mahmoud Abbas's refusal to recognise Israel as a Jewish state.
Analysis: Kim Ghattas, BBC News, New York
President Obama did not rush to congratulate Mr Netanyahu, and when he called him it was mainly to make clear where the US stood on a two-state solution and on nuclear negotiations with Iran, just in case Mr Netanyahu had forgotten during his urgent rush to win more votes.
Mr Netanyahu himself has flip-flopped on his comments about a Palestinian state and his call to drown out Arab voters.
But the damage is done. Campaign rhetoric can be dismissed - but this is also a clarifying moment for all those who still hoped for a peace process.
No matter what Mr Netanyahu says now about peace, the Palestinians can claim he simply doesn't mean it.
On Iran, Mr Netanyahu's return is Mr Obama's loss and it will make Republicans in Congress even more adamant to fight a deal.
He also repeated a frequent criticism of Mr Abbas's decision to form a unity government with militant Islamist group Hamas, which is sworn to Israel's destruction.
And he criticised the idea that Israel might hand over territory to the Palestinians at the current time.
"Every territory that is vacated in the Middle East is taken up by Islamist forces," Mr Netanyahu said.
Despite Mr Netanyahu's comments the White House warned there would be "consequences" for Israel as the US "re-evaluates" its diplomatic strategy.
"He [Mr Netanyahu] walked back from commitments that Israel had previously made to a two-state solution," said White House spokesman Josh Earnest.
"It is cause for the United States to evaluate what our path is forward."
Mr Netanyahu's original comments were made on Monday, one day before Israel's election, when he was asked by an interviewer: "If you are prime minister, a Palestinian state will not be established?"
Mr Netanyahu answered: "Indeed."
Analysts viewed the remark as an attempt to shore up support among right-wing voters as polls showed his Likud party just behind the centre-left opposition alliance, the Zionist Union.
The Zionist Union had promised to repair ties with the Palestinians and the international community.
Mr Netanyahu's remark prompted the US, EU and UN to urge a continuation of efforts to secure a two-state solution in the Middle East.
Mr Netanyahu also used his MSNBC interview to insist that a separate campaign comment, made on election day itself, was not racist.
On Tuesday Mr Netanyahu posted a video message on his Facebook page, in which said: "Right-wing rule is in danger. Arab voters are going to the polls in droves. Left-wing organisations are bringing them in buses."
That video was criticised as "dog-whistle" racism, an accusation he denied in his interview.
"An Arab vote is, I think, it's very, very important... I'm very proud to be the prime minister of all of Israel's citizens, Arabs and Jews alike," he said.
The White House called the video a "cynical election day tactic" and a "pretty transparent effort to marginalise Arab-Israeli citizens".
"I can tell you that these are views the administration intends to communicate directly to the Israelis," Mr Earnest said on Thursday.
Meanwhile, the office of Israel's President Reuven Rivlin confirmed that Mr Netanyahu's Likud party would be the first to meet him for talks on forming a new government. Meetings with representatives of 10 political parties will take place over Sunday and Monday.