Abrams, deputy national security adviser, and Welch, head of State Department's Middle East desk, met Israeli Prime Minister Ariel Sharon and several other Israeli officials Wednesday, seeking clarification of Israel's proposal to build 3,500 new housing units between Jerusalem and Ma'aleh Adomim.
In Washington, State Department deputy spokesman Adam Ereli said the Israelis told them "no final decision" had been made on the issue.
At Thursday's meeting with Palestinian leaders, sources said Abrams and Welch discussed the proposed settlements and Israel's withdrawal from Gaza.
Palestinian sources said the Palestinians urged the United States to stop Israel from "expanding settlements that would harm the peace process."
Ereli called the talks "good" and "full."
He said Palestinian Authority Prime Minister Ahmed Qureia, Security Minister Mohammed Dahlan, Foreign Minister Saeb Erekat, Finance Minister Salam Fayyad, Minister of Interior and National Security Nasser Yussef were involved in the meetings.