CAIRO -- The Obama administration has all but abandoned hope for an early resumption of face-to-face negotiations between Israeli and Palestinian leaders or substantive movement toward agreement on a Palestinian state -- an acknowledgement that it has fallen short of one of its major initial foreign policy goals.

With virtually no possibility of comprehensive high-level negotiations in the foreseeable future, Secretary of State Hillary Rodham Clinton has begun to urge the Arabs to encourage Palestinian participation in lower-level talks with Israel on narrow economic, social and security issues of interest to both sides, according to accounts by Arab and Western diplomats.

"We recognize that things have stalled," Clinton spokesman P.J. Crowley said. "We're looking at a variety of ways that increase interaction between the parties in some form." He described the proposals as "baby steps" that would eventually "create a momentum of their own, and the effort can pick up steam."

"If there's a vacuum," he said, "there are lots of spoilers willing to take advantage. ... We've too often in the past seen events spiral into violence."

The baby-steps approach is similar to the policy advocated by Israeli Prime Minister Benjamin Netanyahu, who has argued that cooperation on economic development and other issues would be more effective than "top down" negotiations. Such cooperation is under way in some areas, particularly West Bank security, but Palestinians have been hesitant, in general, toward the approach for fear that it would delay discussion of more basic issues such as borders.

But Palestinian rejection last weekend of Israel's proposal to limit -- but not stop -- all construction on Arab land was the culmination of months of stalemate and internal political jockeying on both sides that the administration, like so many of its predecessors, has been unable to break through.

Mrs. Clinton flew here last night from an international conference in Morocco, where Arab foreign ministers listened skeptically to her reasons for describing an Israeli offer -- to allow unlimited construction in East Jerusalem and the completion of up to 3,000 housing units, while exercising "restraint" in the rest of the West Bank -- as "unprecedented" and worthy of discussion.

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