Offer incentives to both sides (paid for by the U.S. and other interested parties) that provide real reasons to make painful compromises. For both Israel and Palestine (conditioned on their achieving a real peace treaty) -- Entry into NAFTA (or analogous trade concessions) on favorable terms to promote economic growth. For Israel -- Entry into NATO, with a significant number of NATO troops stationed in front-line positions (so an attack on Israel becomes an attack on NATO), and reimbursement of costs for settlers evacuated from the West Bank. For the Palestinians -- Payment of all claims for people displaced during the various wars (by payment directly to the refugees), and citizenship in Western countries for any Palestinian refugees who cannot be resettled in the Middle East.
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