Prime Minister Benjamin Netanyahu was forced Wednesday to recall an official statement on the peace process which appeared to admit Israel's settlement building was unhelpful in reaching a peace agreement with the Palestinians.

The reference was made in a joint Israeli-Polish declaration which was to have been read out following a meeting in Warsaw between Netanyahu and his Polish counterpart Donald Tusk later the same day.

"The two governments agree on the urgent need to advance towards a two-state solution to the Israel-Palestinian conflict, which must be reached through direct negotiations between the sides without pre-conditions," it began.

"Unilateral steps by either of the sides are not useful to achieving a lasting peace," it continued.

The wording is almost identical to that employed by Washington when criticising the impact of Israel's ongoing settlement construction on occupied Palestinian land.

"There must never be any doubt about the legitimacy of the State of Israel and the security of its citizens, and the right of the Palestinians to a state," it added.

It was only on Wednesday morning, shortly before Netanyahu took off for Poland, that the statement began making headlines in the media, prompting an embarrassing about-face by the premier's office.

Officials close to Netanyahu were quoted by army radio as saying the premier had not been consulted over the wording of the statement and demanded it be recalled.

Haaretz news website also quoted Netanyahu's office as saying staff of National Security Adviser Yaakov Amidror had worked on the statement and agreed it with Warsaw, without it being seen by the premier or by Amidror.

Netanyahu's bureau did not respond to calls for a comment on the incident, but Haaretz quoted officials as saying the statement was "only a protocol document" that did not represent the Israeli government's position.

Haaretz suggested the "surprising" wording of the statement had initially sparked speculation that Netanyahu was trying to send "a moderate message" to the world after Deputy Defence Minister Danny Danon embarrassed him by saying the government was not serious about reaching a peace agreement.

In an interview last week, Danon said that if the question of a two-state solution was put to a vote, most ministers in Netanyahu's rightwing Likud and those with its Jewish Home ally would be opposed.

"If there will be a move to promote a two-state solution, you will see forces blocking it within the party and the government," he said.

Commentators largely agreed that Danon had merely stated the obvious.

In a sign of the growing internal problems facing Netanyahu over US moves to revive the peace process, a third of Israeli MPs on Tuesday signed up to join a parliamentary lobby group which opposes the creation of a Palestinian state.

The Knesset Caucus for the Land of Israel, which met for the first time under the current administration on Tuesday, backs the idea of Israeli sovereignty over all of the Palestinian territories.

The meeting was attended by three cabinet ministers: Naftali Bennett who heads the far-right Jewish Home party, his deputy Uri Ariel, and Uzi Landau of the hardline Yisrael Beitenu party, press reports said.

Addressing the group, Bennett said the goal of the caucus was to present an alternative to the two-state solution.

Ariel, who serves as housing minister, said the group faced a tough struggle but pledged to help. "My ministry is prepared to build thousands of apartments in Judaea, Samaria and Jerusalem," he told them, referring to the West Bank.