US president Barack Obama wants to sharply limit Israel's blockade of the Gaza Strip in the aftermath of the botched naval raid that is straining American and Israeli relations with allies around the world.
"The situation in Gaza is unsustainable," Mr Obama said as he met Palestinian president Mahmoud Abbas in the White House Oval Office yesterday.
He said the attention of the world was on the problem because of the "tragedy" of the Israeli raid that killed nine people trying to bring in supplies.
Mr Obama said Israel's broad blockade on goods entering Gaza should be narrowed so that arms were kept out, but not items needed for the Palestinians' daily life and economic development.
In connection with Mr Abbas' visit, the White House announced a £276 million aid package for Gaza and the West Bank.
State Department spokesman PJ Crowley, said the money represented specific allocations that had already been budgeted for the Palestinians, some of it fulfilling a £620 million commitment by secretary of state Hillary Clinton last year.
Projects announced yesterday included £165 million for mortgage assistance in the West Bank and £7 million to build five new schools in Gaza.
Building materials are among items forbidden for delivery to the Gaza Strip by the Israelis, who say the Palestinian enclave's militant Hamas leaders would use them to help strengthen Hamas' military capabilities.
"The key here is making sure that Israel's security needs are met, but that the needs of people in Gaza are also met," said Mr Obama.
"So if we can get a new conceptual framework ... it seems to me that we should be able to take what has been a tragedy and turn it into an opportunity to create a situation where lives in Gaza are actually, directly improved."
The approach marked a shift although it stopped well short of meeting international calls for an end to the three-year-old blockade, which Israel says is needed to keep arms away from the Hamas movement that controls Gaza.
Mr Obama said the US would discuss the new approach with European leaders, Egypt, Israel and the Palestinian Authority.
Mr Abbas welcomed the aid package, which will go for things like creating jobs and improving access to drinking water, but urged further action on the blockade.
"We also see the need to lift the Israeli siege of the Palestinian people, the need to open all the crossings and the need to let building material and humanitarian material and all the necessities go into the Palestinian people," he said Abbas.
Mr Abbas and his more moderate Fatah movement lead the West Bank, the other Palestinian territory in Israel.
Israel's ambassador to the US, Michael Oren, said Israel was open to suggestions that would address the needs of the Palestinian people along with Israel's security requirements, but defended the blockade as "essential for not only Israel's security, Egypt's security, but it's essential for the peace process".
He bridled at the notion of letting through goods such as building materials.
"We know that Hamas is going to take these materials and not use them to build schools, they're going to use them to build military bunkers. So we are reluctant to let those things through," he said.
Israel's deadly May 31 raid on a flotilla hoping to break the blockade on Gaza killed nine men in the flotilla, including eight Turks and a Turkish American.
Israel says its soldiers opened fire only after being attacked while the flotilla activists accuse Israel of using unnecessary violence.
Mr Oren said Israel and the US were discussing ways to involve the international community in a probe of the flotilla raid.
He said while Israel would reject enemy countries like Libya and Venezuela "sitting in judgment" of Israel or its soldiers, the participation of other countries was being discussed.
"We would consider an international role, an international component in what would be an Israeli investigation," Mr Oren said.
"There's an internal discussion within the Israeli government and we are in close communication with the Obama administration on this issue."