"United Jerusalem is Israel's capital. Jerusalem was always ours and will always be ours. It will never again be partitioned and divided," Netanyahu said at a state ceremony to mark Jerusalem Day.
Netanyahu said he had made the same declaration during his recent visit to Washington, where he met with United States President Barack Obama over the peace process and Iran's nuclear program.
Jerusalem Day celebrates the conquest of the city during the 1967 Six Day War, before which Jordan controlled east Jerusalem, while Israel had the western section. Shortly after the war, Israel annexed east Jerusalem.
"Only under Israeli sovereignty will united Jerusalem ensure the freedom of religion and freedom of access for the three religions to the holy places," Netanyahu added.
The ceremony took place at Ammunition Hill in east Jerusalem, site of one of the bloodiest battles in the city in the 1967 war, situated now in a Jewish neighborhood.
Palestinians: Netanyahu's comments invite 'eternal' conflict
Palestinian negotiator Saeb Erekat said later Thursday that Netanyahu's position on Jerusalem was a setback to the goal of a two-state solution, which is strongly supported by the Obama administration.
"Mr. Netanyahu, by saying that, he's saying the state of conflict will be eternal," Erekat said.
In his speech, Netanyahu echoed remarks made by President Shimon Peres, who said earlier at the ceremony that, "Israel will never have another capital other than Jerusalem, and Jerusalem will never be the capital of another people."
Peres stressed that Jerusalem was and remained Israel's capital, and spoke of the days before the Six Day war when Jews had limited access to the Old City.
"When Jerusalem was in non-Jewish hands, the Jews weren't allowed to pray at the holy sites; but under Jewish control, it is open to all faiths, and all prayers," he said.
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