Any peace deal with the Palestinians must be based on Israel's ability to defend itself if the agreement breaks down, Prime Minister Benjamin Netanyahu said just hours before a visit by Washington's top diplomat.

"Peace rests on security. It is not based on good will or legitimacy as some think. It is based, first and foremost, on our ability to defend ourselves," he said at a ceremony marking the 109th anniversary of the death of Theodor Herzl, the founding father of Zionism.

U.S. Secretary of State John Kerry is due back in Jerusalem on Thursday evening on his fifth trip in as many months as he seeks to coax Israel and the Palestinians back to direct negotiations which collapsed nearly three years ago.

Ahead of his visit, Netanyahu's rhetoric has taken on a different tone and focused more on the substance of any future talks than on the obstacles to actually starting them.

"Without security, without the army that Herzl called to establish, we will not be able to defend peace, we will not be able to defend ourselves if the peace unravels," he said in remarks communicated by his office.

"A basic condition for the existence of peace, for the achievement of it and for preserving it, is security."

Earlier, Haaretz newspaper quoted "a senior cabinet member from Netanyahu's Likud" party as saying the premier would be ready to give up almost all of the West Bank if Israel's security needs were met.

"His two key principles are maintaining the settlement blocs as part of Israel and a military presence in the Jordan Valley, without Israeli sovereignty there," the minister said.