"Do not wait for peace to come before you normalize relations with us. Normalize relations now and peace will come," she said in a speech to the American Israel Public Affairs Committee, a powerful pro-Israel lobbying group.
'Peace will come.' Livni at AIPAC conference (photo: Reuters)
"You have the power to change reality and to encourage the Palestinians to embrace co-existence," said Livni, who drew applause from an audience of 5,500 people packed into a Washington convention hall.
She added that Israel expects Palestinian President Mahmoud Abbas and the Palestinian people to openly support a two-state solution and denounce terror.
Defense Minister Amir Peretz said at the AIPAC conference that the Saudi initiative ‘could be the breakthrough we need for a political process in the region.’
He added that 2007 was a critical year in thwarting Iran's nuclear program, and repeated Israel's demand to release the kidnapped soldiers.
Earlier, Livni cautiously welcomed a comprehensive Arab-Israeli peace deal, dubbed the Saudi initiative, which calls for the Arab world to normalize ties with Israel in return for Israel withdrawing form all occupied Arab land.
"There are positive elements in the Saudi initiative, but some of its clauses are contrary to the principle of two states," Livni told Israeli public radio from Washington.
The Saudi plan also calls for the establishment of an independent Palestinian state.
Livni said the initiative contained "two additional clauses very problematic for Israel" concerning the right of return of Palestinian refugees.
One calls for the return of Palestinians who fled or were forced out in 1948, the other rules out their permanent settlement in the Arab states where they or their descendants currently live.
Livni is expected to hold separate meetings with UN Secretary General Ban Ki-moon and US secretary of State Condoleezza Rice to discuss the Mecca agreement and the upcoming Arab League Summit, which is scheduled to take place on March 28 in Riyadh, Saudi Arabia.