"It is clear that some of the settlements, some of them, will not be included in the agreement. That's clear. Everyone understands that. I will ensure the number will be as small as possible, as far as is possible, if we get there," Netanyahu said.
Netanyahu's comments to Israel's Channel 2 television were his first in Hebrew to an expressly Israeli audience suggesting he would concede settlements for peace, though he made a similar commitment in English in a 2011 speech to the US Congress.
In May 2011 Netanyahu said for the first time he was prepared to give up settlements for peace though Palestinians at the time rejected other terms Israel had set for then stalled negotiations.
- Abbas: 'No way' for recognition of Israel as Jewish state
- Abbas threatens to quit talks
- Obama: Israel faces bleak future should talks fail
The current round of US-led negotiations, initiated by Secretary of State John Kerry in July of last year for a nine-month period, have yet to yield significant progress in bridging the disagreement between the two parties.
Despite the peace negotiations, Israel has intensified construction in the past year. Central Bureau of Statistics figures released on Monday showed the number of new construction projects in the settlements doubled to 2,534 in 2013, from 1,133 in 2012.
The comments were recorded during a five-day visit to the United States from which he returned on Friday and which included talks at the White House with US President Barack Obama on Monday about the issues delaying a peace deal.
The prime minister also gave the keynote address Tuesday at the annual AIPAC Policy Conference, during which he addressed key Israeli demands that must be met. Netanyahu said that while he is "prepared to make historic peace with our Palestinian neighbors," Palestinian Authority President Mahmoud Abbas must accept the Jewish state with "no excuses, no delays."
By recognizing a Jewish state, Abbas would be telling his people that while there might be a territorial dispute, the right of the Jewish people to a state of their own is beyond dispute, Netanyahu said.
But in comments published Friday by the official WAFA news agency, Abbas said there was "no way" he would recognize Israel as the Jewish State and that he would withstand any American pressure to accept that condition.
The Associated Press contributed to this report