Netanyahu played down the international criticism and blamed the Palestinians for the impasse. He noted that a 10-month partial settlement freeze he imposed in 2010 had failed to restart negotiations.
"The reason why the Palestinians avoided negotiations for the past four years is a very simple one. They avoided negotiations because they were willing to take concessions from Israel but they were not prepared to make concessions to Israel," he said.
Netanyahu said that negotiations should resume without any conditions, and even held out the possibility of abandoning the E1 plan.
"We remain committed and this is what we prefer, a bilateral negotiation without preconditions in which all these questions can be raised, that is our preference and I hope the Palestinian Authority will go that route because it is better for them and it is better for us," he said.
While Netanyahu's term has been characterized by tensions with Israel's allies, he remains popular at home and appears set to win a new term as head of a hard-line coalition in parliamentary elections next month.
Netanyahu told the audience he had made great gains during his term. He claimed he had helped draw attention to Iran's suspect nuclear program, beefed up Israel's cybersecurity and missile defenses, and fortified Israel's southern border with Egypt to prevent militant attacks and waves of African migrants from entering the country.
Yet in a moment of candor, he signaled that his sometimes rocky relations with President Barack Obama could have been handled better. "Who doesn't have regrets?"
Ian Deitch contributed to this report from Jerusalem