By Adam Entous

JERUSALEM, Aug 4 (Reuters) - The United States is pressing Israeli and Palestinian leaders to find common ground on some key issues within four months, in time for a conference on creating a Palestinian state, officials said on Saturday.

Abbas aide Nabil Amr confirmed that Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas will meet in the West Bank city of Jericho on Monday. It will be their first bilateral meeting in the occupied West Bank.

Amr said the leaders must be ready to hold "political" talks that include so-called final status issues for the creation of a Palestinian state, including borders.

U.S. Secretary of State Condoleezza Rice said earlier this week that Olmert had agreed to begin talks with Abbas on "fundamental" issues.

But U.S. officials would not say whether this meant that the two leaders would discuss the most contentious final-status questions of borders, the future of Jerusalem and the right of return for Palestinian refugees.

Olmert's office had no immediate comment on what would be discussed on Monday.

Olmert has rebuffed Arab calls for setting a specific timeline for final-status negotiations over a Palestinian state.

But as an interim step, Olmert and Abbas will try to reach a set of common "principles" on some of the core issues related to statehood before an international conference, expected to be held in November, Western diplomats and Israeli officials said.

Abbas aide Saeb Erekat said Rice was "serious" about starting talks on key questions.

"No one can talk about 'fundamental' issues without solving the problems of borders, settlements, Jerusalem and refugees, because these are the fundamental issues for the establishment of a Palestinian state," Erekat said.

Western officials said the parties would later appoint working groups to deal with specific areas of disagreement like Jewish settlements.

It is unclear how Abbas can deliver on any deal when a third of the likely population of a Palestinian state is under Hamas control in the Gaza Strip.

It is also unclear whether Olmert, whose popularity plummeted after last year's inconclusive war in Lebanon, has the political clout to make major concessions.

Zakaria al-Qaq of al-Quds University said the effort was little more than "public relations for weak leaders". "I don't think this is going to produce any tangible results," he said.

"BIG MISTAKE"

The Bush administration has sought to bolster Abbas and the new government he formed in the occupied West Bank after Hamas Islamists seized control of the Gaza Strip in June.

Like Israel, the United States has told Abbas that it would be a "big mistake" for him to try to form another unity government with Hamas, which has rejected Western calls to recognise Israel, renounce violence and abide by interim peace deals, a Western official in the region said.

The official said Washington wanted the bilateral track between Olmert and Abbas "to become deeper and more energetic over the next period leading up to the international meeting in the fall."

The official, speaking on condition of anonymity, said "there needs to be some narrowing, some common ground" on some of the fundamental issues "that then the international community can get behind" at the conference.

Saudi Arabia, which does not have diplomatic relations with Israel, signalled earlier this week that it intended to attend the conference if "substantive" issues were addressed.

The Western official said Washington has not ruled out Syria's participation. "We did not open any specific doors, we didn't close any doors," the official said. (Additional reporting by Ali Sawafta and Mohammed Assadi in Ramallah)

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