In his talks with Palestinian Authority President Mahmoud Abbas, Xi said China firmly supports the just cause of the Palestinian people, while noting China believes their dream for an independent state can come true "provided (you) hold the general direction of peace," the official Xinhua News Agency reported.
Abbas' visit to China, which began Sunday, came ahead of that of Israeli Prime Minister Binyamin Netanyahu, although there were no plans for the two to meet in China.
Netanyahu began his trip in Shanghai with meetings with business leaders before proceeding to Beijing on Wednesday for talks with Chinese leaders.
Xi, who became China's top leader in March, told Abbas the Palestine issue is the core one in the Middle East issue, Xinhua said.
"The issue, already lasting more than half a century, has brought deep suffering to the Palestinian people and remains an important reason of extended turbulence in the Middle East region," Xi said.
"Despite turns and twists in peace talks between Palestine and Israel, we believe that the dream of the Palestinian people to establish an independent state can come true provided (you) hold the general direction of peace and make unremitting efforts (in your cause)," Xi said.
Abbas was quoted as stressing a political solution "remains the best and only way out," and that the issue be addressed through peaceful talks on the basis of a two-state solution. He also urged Israel to observe international pacts and halt settlement construction to create conditions for resumption of the peace talks.
Xi, in his talks with Abbas, made a four-point proposal calling for an independent Palestinian state and peaceful co-existence of Palestine and Israel on the basis of the 1967 borders and with East Jerusalem as its capital, Xinhua reported. The proposal said Israel's right to exist and its legitimate security concerns should be fully respected.
The proposal said negotiations can be the only way to peace between Palestine and Israel and that principles such as "land for peace" should be firmly upheld. It also said the international community should provide important guarantee for progress in the peace process.
Separately, China Daily, in a long article, said China is expected to play a bigger role in promoting peace in the Middle East and quoted analysts that the hosting of Abbas and Netanyahu almost simultaneously showed China is willing to do more for the peace process.
Hua Liming, former ambassador to Iran and an expert in Middle East studies, told China Daily it would be hard to say whether the timing of the two visits was coincidental or intentional, but the fact that Abbas and Netanyahu "don't mind showing up in China at the same time has left the world with a lot of expectations for their visits."
Abbas told Xinhua on Friday that he "expects Beijing's contribution to the stalled peace process." He also told Xinhua: "It is very good that Netanyahu will visit China too because it is a good opportunity for the Chinese to listen to both of us."
Hua told China Daily said there were obstacles to resuming the peace talks as the two sides are unlikely to compromise over issues including division of the land, Palestine refugees and the status of Jerusalem.
"These issues are not only between Palestine and Israel but involve the whole Arab world," said Hua.
He said China "hopes to contribute to peace between Palestine and Israel, play a positive role and be a responsible power."
Chinese Foreign Ministry spokeswoman Hua Chunying said earlier that if the Palestinian and Israeli leaders were willing to meet in China, Beijing would provide all necessary assistance.
Hua said Netanyahu's visit is expected to result in more economic and trade cooperation between Israel and China, the report said.
The New York Times said Netanyahu's talks with Chinese leaders were expected deal with broader Middle Eastern security concerns such as Iran's nuclear program and the worsening situation in Syria. China, which is one of the main buyers of Iranian oil, has criticized sanctions against Iran. China, along with Russia, is also against stronger intervention in the Syrian conflict.