* Negotiations broke down in 2010 after settlement building
* Kerry is trying to revive process for fifth time
* Says talks will be tough, progress needed before fall (Adds Palestinian statement)
By Lesley Wroughton and Sylvia Westall
KUWAIT, June 26 (Reuters) - Israeli and Palestinian leaders are both committed to reviving peace talks, U.S. Secretary of State John Kerry said on Wednesday, but he acknowledged that progress on the long-stalled negotiations would be tough.
Israeli-Palestinian talks broke down in late 2010 in a dispute over construction of Jewish settlements on occupied West Bank land that Palestinians want as part of their future state.
Kerry, who held separate talks with both sides in May, said Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas wanted the peace process to move forward. This would be Kerry's fifth attempt to restart talks.
"I believe they believe the peace process is bigger than any one day or one moment, or certainly more important to their countries than some of their current political challenges," he told a news conference in Kuwait with Foreign Minister Sheikh Sabah Khaled al-Sabah.
"That is why both of them have indicated a seriousness of purpose. I would not be here now if I didn't have the belief this is possible," he said.
Kerry earlier met Kuwait's ruler, crown prince and foreign minister as part of a regional tour. He flies to Amman later on Wednesday and will meet separately with Jordan's King Abdullah, Netanyahu and Abbas during his two-day trip there.
The Palestinian Liberation Organization reiterated on Wednesday that there must be a freeze in settlement construction before resuming peace talks, a long-standing demand of Abbas.
"The PLO is well aware that any eventual solution must be reached through a negotiated settlement...However, it is vital that this negotiated settlement be based on clear parameters, which include the 1967 border as a starting point and the fulfilment of prior obligations," it said.
Most countries deem all Israeli settlements in the West Bank as illegal. Israel, which captured the land in the 1967 Middle East War, disputes this. There are about 120 government-authorised settlements in the West Bank and dozens of outposts built by settlers without official sanction.
In an apparent bid to support Kerry's efforts, Netanyahu has quietly halted housing starts in settlements in the Israeli-occupied West Bank and East Jerusalem since his new government came to power in March, Israel's housing minister said earlier this month, but projects already under way are continuing.
Kerry said he did not want to set any deadlines for the peace process but called for progress before the United Nations General Assembly in September. Mistrust needed to be overcome, he said, to "avoid the disappointment and failures of the past".
On Tuesday, Netanyahu said Israel intended to persist in the negotiations to tackle all the issues. "This will require time, determination and a systematic approach," he said, adding that he hoped the Palestinians sought the same. (Additional reporting by Jeffrey Heller in Jerusalem; Editing by Alistair Lyon)
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