There were major life-and-death security concerns that, he said, "have to be sealed in a peace agreement before a Palestinian state is declared."
"Give up the fantasy of flooding Israel with Palestinians," he said directly to Abbas, imploring Palestinians to first recognize Israel.
"The core of the conflict is not the settlements, the core of the conflict is their refusal to accept a Jewish state," he said.
Netanyahu said if that was done, Israel would be prepared to take some painful steps.
"I continue to hope that President Abbas will be my partner for peace. We have to stop negotiating about the negotiations," he said. "Let's just get on with it."
Mahmoud Abbas Takes UN Stage
Before Netanyahu, Abbas took the U.N. stage today in front of the General Assembly to request that leaders accept Palestine as a member state despite U.S. and Israeli opposition.
He pointed out speeches made last year, most notably by President Obama and other leaders during the last General Assembly, hoping the stalled Middle East peace process would resume.
"But all of the sincere efforts and other parties were smashed against a rock by the Israeli government," Abbas said.
He pointed to settlement construction as the embodiment of colonial occupation and racial discrimination.
"It is the primary cause of the failure of the peace process," he said, adding that Israeli settlements threaten the very efficacy of the Palestinian government.
Abbas said that he sought international recognition of Palestinians with East Jerusalem as the capital under the June 4, 1967 borders.
"It is no longer possible nor practical nor acceptable to return to conduct business as usual as if everything is fine," he said.
After repeatedly criticizing Israel throughout his speech, Abbas said: "We extend our hands to the Israeli government and the Israeli people. Let us urgently build a future for our children."