"I told (President Barack) Obama that I can take the issue to the Cabinet and get the Cabinet to pass a freeze extension and then I got a message from the Americans to forget the issue," Netanyahu told the Knesset's Foreign Affairs and Defense Committee Monday, Ynetnews.com reported.
The United States asked Israel to consider extending the freeze for three months and Israel was prepared to do so, Haaretz quoted Netanyahu as saying.
Contrary to reports, Israel did not refuse to impose the three-month extension of a construction freeze in the settlements, Netenyahu said. He said it was the "United States who decided against that direction, rightfully, in my opinion," Haaretz reported.
Israel imposed a 10-month moratorium on construction in West Bank settlements that ended in September 2010. Shortly after, in an effort to move the peace process forward, the U.S. administration offered Israel a range of incentives, including the sale of F-35 fighter jets if it agreed to extend the freeze for three months.
In December, Washington announced it was "ending the contacts to try to achieve another moratorium" after months of negotiations, the newspaper said.
Netanyahu said U.S. officials will visit the region later this month in an effort to push the peace process between Israel and the Palestinians forward.
Netanyahu blamed the Palestinians for the deadlock in negotiations.
"During the Cabinet meeting on Sunday, I called on Abu Mazen [Palestinian President Mahmoud Abbas], to hold direct negotiations, but I got no answer," the newspaper quoted Netanyahu as saying.
"We took many actions in order to move the peace process forward but the Palestinians did not even advance one millimeter despite the settlement freeze. The Palestinians entered talks only toward the end of the freeze and the only subject they wanted to discuss was an extension of the freeze," Netanyahu said.
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