By saying he wants to step down as president, Mahmoud Abbas has highlighted a deep Palestinian despair rooted in decades of failed peace initiatives and fruitless violence.
Neither strategy has yielded a Palestinian state, and Israeli settlements still encroach on lands that would make up their would-be nation.
Facing a hawkish Israeli government and an Obama administration reluctant to put muscle behind its demands on Israel, many Palestinians say they see no hope at all.
"I am frustrated with so-called peace and the so-called 'two-state solution,'" said Rami Hassouna, a 34-year-old construction contractor in the West Bank city of Ramallah. "If all of this was one percent possible before, now I think it's impossible."
Moderate Palestinians are worried that Abbas, in saying he doesn't want another term in office, will only deepen frustrations and boost the militants who claim violence is the only option.
Some top Israelis also urged him to reconsider, but the widespread feeling on their side is that they offered Abbas sweeping concessions and got no response.
While Israel in recent months has eased restrictions on movement in Palestinian areas and the West Bank has enjoyed a limited economic recovery, the political stalemate is raising the specter of new violence.
"I think that this position of President Abbas is ringing the alarm that things have been deteriorating in Palestine and in Palestinian-Israeli relations," said Palestinian government spokesman Ghassan Khatib.
On the day after Abbas' Thursday speech, Palestinians debated whether their president was serious about not running in Jan. 24 elections, or was just trying to shake things up. It's also far from clear whether the vote can be held at all, given that 1.5 million Palestinians live in the Gaza Strip, a territory now ruled by Hamas militants who do not recognize Abbas' authority.
But the mere threat to step down has heightened Palestinians fear that their dream of independence is slipping away.
Palestinian exasperation with President Barack Obama is running high. He began his term by reaching out to Muslims and promising zero tolerance for new Israeli settlement construction. The Obama team has since shifted stance, and many Palestinians believe their leader was simply hung out to dry.
Abbas aides say the last straw for him was seeing U.S. Secretary of State Hillary Rodham Clinton standing beside Israeli Prime Minister Benjamin Netanyahu in Jerusalem last weekend and agreeing with him that he had made "unprecedented" concessions over settlements.
One senior aide, who asked not to be named because he was discussing his boss' private thinking, cited another incident that made 74-year-old Abbas want to quit. His young grandson, the aide said, told him his schoolmates were calling him a collaborator with Israel _ the fiercest insult in the Palestinian lexicon.
A series of frantic phone calls and meetings with Abbas before his speech underscored the sense of crisis.
President Hosni Mubarak of Egypt and King Abdullah of Jordan joined a chorus of Palestinian politicians in urging Abbas not to pronounce the peace process dead, senior Abbas aides said on condition of anonymity because the conversations were private.
They felt such words could destabilize the Palestinian territories and lead to violence, the aides said. In the end, Abbas softened his words and expressed a belief that his people could still achieve their goals. Two top Israeli moderates, President Shimon Peres and Defense Minister Ehud Barak, also called Abbas to urge him to stay on.
The feeling on both the Palestinian street and in the corridors of power, however, is that peace with Israel is not possible under Netanyahu, who rules out key concessions such as allowing the Palestinians to have their capital in east Jerusalem. Abbas says he will not sit down with Israel to discuss a peace deal until it freezes all settlement expansion.
The Palestinian narrative stands in sharp contrast to the widely held Israeli one. Israelis feel they have gotten little back for their efforts: They signed the 1993 Oslo peace accords, but the Palestinians persisted with terror attacks; Israel offered a state in 2000 but Palestinians staged a new uprising, and then Israel withdrew from Gaza in 2005 and the Palestinians fired rockets from it.
Israelis are quick to cite an offer that Netanyahu's predecessor, Ehud Olmert, supposedly made to Abbas in the waning days of his premiership _ 93.5 percent of the West Bank and the rest in a land swap.
Palestinians say the offer was unwritten and never formalized.
Abbas' real problem is not Israeli settlements, wrote Jerusalem Post editor David Horowitz in his paper's Friday edition.
"It is, rather, his knowledge that, were the talks to resume, Netanyahu would offer him less. Abbas, in short, missed the boat."
Another Israeli commentator, Ben Caspit, wrote in the Maariv daily that only bold action from Obama can salvage Mideast peace, but doubts it will happen.
A year has passed since Obama's election, he wrote, "and we remain with the hope and its shattered pieces."
Associated Press Writer Dalia Nammari contributed to this report from Ramallah, West Bank.