The US Secretary of State has warned that peace between Israelis and Palestinians can only be achieved through the two-state solution.

In his final speech on Middle Eastern policy in Washington, John Kerry warned the US could not stay silent as conditions worsened on the ground.

He said the US would have been guilty of a "dereliction of duty" if it had vetoed a recent UN resolution demanding an end to Israeli settlement building on occupied territory.

He said the decision to abstain was taken in order to preserve the two-state solution.

"That's what we were standing up for: Israel's future as a Jewish and democratic state, living side by side in peace and security with its neighbors," he said.

"The two-state solution is the only way to achieve a just and lasting peace between Israelis and Palestinians.

"The truth is that trends on the ground - violence, terrorism, incitement, settlement expansion and the seemingly endless occupation - are destroying hopes for peace on both sides and increasingly cementing an irreversible one-state reality that most people do not actually want," he said.

He said the decision to abstain from the vote was in accordance with US values and warned that millions of Palestinians in the West Bank are being persecuted:

“They are restricted in their daily movements by a web of check points and unable to travel in to or out of the West Bank without a permit from the Israelis,” he said.

“So if there is only one state, you would have millions of Palestinians permanently living in segregated enclaves in the middle of the West Bank with no real political rights.”

The decision not to veto the vote has been seen in some quarters as a parting shot from Barack Obama just weeks before US President-elect Donald Trump's inauguration.

It has sparked a war of words with Mr Trump tweeting on Wednesday: "We cannot continue to let Israel be treated with such total disdain and disrespect.”

He said Israel used to have “a great friend in the US but not anymore” and urged Israel to “stay strong” as “January 20th is fast approaching.”

He also tweeted: "Doing my best to disregard the many inflammatory President O statements and roadblocks. Thought it was going to be a smooth transition - NOT!"

Doing my best to disregard the many inflammatory President O statements and roadblocks.Thought it was going to be a smooth transition - NOT!

— Donald J. Trump (@realDonaldTrump) December 28, 2016

In the immediate wake of the vote last week, Mr Trump - who had wanted to US to veto the vote to condemn the building of settler homes - said things at the UN would "be different after Jan. 20th."

Mr Kerry said President Obama had been committed to Israel and to the peace process but warned: "Despite our best efforts over the years, the two-state solution is now in serious jeopardy.

"We cannot, in good conscience, do nothing and say nothing, when we see the hopes of peace slipping away."

Ahead of the address, a senior member of Israel's government called the speech "pathetic," further heightening tensions between the two allies as President Obama prepares to leave office.

In a radio interview this afternoon, the Israeli public security minister, Gilad Erdan said Mr Kerry’s speech was part of an effort to hinder the incoming Trump administration.

"This step is a pathetic step. It is an anti-democratic step because it's clear that the administration and Kerry's intention is to chain President-elect Trump," Erdan told Israel Army Radio.

Israeli Prime Minister Benjamin Netanyahu also hit out at the speech calling it "biased" and saying it "obsessively" focused on settlements and ignored the root of the conflict between to two sides.

Mr Kerry said most people in Israel do not know how systematic the settlement process has become in recent years, with tens of thousands of Israelis moving into the middle of Palestinian territories.

He said polls have shown that a majority of Israelis support the creation of a separate Palestinian state and warned that if Israel rejects a two-state solution for peace with the Palestinians, the country will have to face up to a "fundamental reality:"

"If the choice is one state, Israel can either be Jewish or democratic - it cannot be both -and it won't ever really be at peace."