Liu Jieyi said at a news conference that China's future diplomatic efforts will focus on trying to move toward a negotiated solution based on the four proposals.
Xi signaled China's stepped-up engagement in the Middle East when he met about two weeks ago in Beijing with Palestinian President Mahmoud Abbas and outlined the plan.
The four points are:
1.) Advancing the two-state solution based on 1967 borders with east Jerusalem as the capital of a new Palestinian state.
2.) Upholding "the concept of common, comprehensive, cooperative and sustainable security," immediately ending Israeli settlement building, taking immediate measures to prevent violence against civilians, and calling for an early resumption of peace talks.
3.) Coordinating international efforts to put forward "peace-promoting measures that entail joint participation at an early date."
4.) Promoting peace through development and cooperation between the Palestinians and Israel.
China views both Israel and the Palestinians as "important partners" in its "One Belt, One Road" initiative, a mammoth Chinese-funded push to develop transport routes including ports, railways and roads to expand trade in a vast arc of countries across Asia, Africa and Europe, the ambassador said.
China has also proposed launching a "China-Palestine-Israel tripartite dialogue mechanism in order to coordinate the implementation of major assistance programs in Palestine," he said.
But the gaps between Israeli and Palestinian leaders remain wide, preventing any meaningful talks since 2009.
Tensions escalated recently after Arab terrorists murdered two Israeli police officers at the Temple Mount in Jerusalem on July 14, prompting Israel to install security devices that sparked Arab outrage and clashes.
Under intense pressure, Israel removed the metal detectors last week and prayers at the Al-Aqsa Mosque continued.
Liu said China plans to hold a seminar for Israeli and Palestinian "peace activists" this year, seeking "to contribute wisdom for the settlement of the Palestinian question."
He urged the international community to "respond positively to the proposals made by China because we believe these four proposals once fully implemented will really go a long way towards helping the issue to be solved through negotiations, and also contribute to stability of the relations between the two sides."