In an interview with Newsweek published Friday, the prince said the United States can "persuade the Israelis to work for a peaceful settlement."
"It needs to tell them that if it is going to continue to help them, they must be reasonable and make reasonable concessions," he said.
Faisal said the possibility of a normal relationship with Israel is the "only chip" Arab countries have and they should not give it up until Israel withdraws from the West Bank.
Newsweek published the interview the day after President Barack Obama's speech in Cairo calling on both sides to work for a two-state solution for Palestinians. Faisal said the change in administrations means the United States is "not the same America" as it was under former President George W. Bush.