Mitchell clarified in an interview to the PBS network that the United States would use incentives or sanctions against both sides.
According to American law, Mitchell said, the US can freeze its support for loan guarantees to Israel. He added that all options must remain open and that the sides must be convinced about what their important interests are.
The US envoy noted that some progress had been made and that his country would continue its efforts to resume the negotiations.
The American guarantees allow Israel to raise funds at low interest rates and improve the Jewish state's credit rating. The last time the US threatened to freeze the loan guarantees was during the term of President George Bush Sr. and former Prime Minister Yitzhak Shamir.
Ahead of Mitchell's visit, US Secretary of State Hillary Clinton held talks Friday with Jordanian Foreign Minister Nasser Judeh and Egyptian Foreign Minister Ahmed Aboul Gheit. Egyptian Intelligence Minister Omar Suleiman is also in Washington.
Clinton's aim is to recruit Egypt to host a possible meeting between Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas, in which a resumption of direct negotiations will be declared.
The secretary of state Hillary Clinton said after meeting with her Jordanian counterpart that she was working to restart peace talks between Palestinians and Israelis "without preconditions."
"We are working with the Israelis, the (Palestinian Authority), and the Arab states to take the steps needed to relaunch the negotiations as soon as possible and without preconditions," she said.
Clinton and Judeh said that resolving those matters first would eliminate Palestinian concerns about continued construction of Jewish settlements in disputed areas. They said negotiations should begin as soon as possible and be bound by deadlines.
"Resolving borders resolves settlements, resolving Jerusalem resolves settlements," Clinton said after meeting Judeh at the State Department. "I think we need to lift our sights and instead of being looking down at the trees, we need to look at the forest."
Peace efforts in the past have tended to focus on broader issues, including settlements, the fate of Palestinian refugees and water, with even more contentious matters like borders and Jerusalem being left for so-called "final status" talks.
"If you resolve the question of borders then you automatically resolve not only settlements and Jerusalem but you identify the nature on the ground of the two-state solution and (what) it looks like," Judeh said.
Both Clinton and Judeh spoke out against new Israeli housing construction in east Jerusalem, which the Palestinians claim as their capital, saying it was damaging to the process.
'Hunger for a resolution'
When he travels to the region, Mitchell is expected to be carrying letters of "guarantees" outlining the US position.
The letters are likely to contain gestures to both sides. For the Palestinians, that would include criticism of settlements and the belief that the borders that existed before the 1967 Arab-Israeli War should be the basis of a future peace deal.
For the Israelis, they would acknowledge that post-1967 demographic changes on the ground must be taken into account, meaning that Israel would be able to keep some settlements.
Clinton did not address the letters in her remarks. But she said the administration wanted a resolution that meets both the Palestinian goal of a clearly defined and viable state based on the borders that existed before the 1967 war "with agreed swaps" and the Israeli goal of security within boundaries that "reflect subsequent developments."
"There is a hunger for a resolution of this matter, a two-state solution that would rebuke the terrorists and the naysayers, that would give the Palestinians a legitimate state for their own aspirations and would give the Israelis the security they deserve to have," she said.
"This is a year of renewed commitment and increased effort towards what we see as an imperative goal for the region and the world," Clinton said.
Judeh said it was essential that once they resume, the negotiations must be "bound by a timeline and a clear plan with benchmarks."
"You cannot just have another open-ended process," he said. "Some deadlines have to be put on the table and these deadlines help to serve the parties rather then present obstacles in the path to peace. They help the parties put things in the right timeframe and the right perspective."
The Associated Press and AFP contributed to this report