Read this in the NY Times about a month ago:
First, Palestinian officials would have to accept that there would be no right of return for refugees of the 1948 war that established the Israeli state, and for their millions of descendants. Rather, the Palestinians would have to accept some kind of compensation.
Second, the two sides would have to share Jerusalem — Palestinians locating their capital in the east and Israelis in the west, and both signing on to some sort of international agreement on how to share the holy sites in the Old City.
Third, Israel would return to its 1967 borders — before it captured East Jerusalem and the West Bank in the Six-Day War — give or take a few negotiated settlements and territorial swaps.
Fourth, the United States or NATO would have to give Israel security guarantees, probably including stationing troops along the Jordan River, to ease Israeli fears that hostile countries could use the Palestinian state as a springboard for attacks. And finally, Arab neighbors like Saudi Arabia would recognize Israel.
That makes sense to me. Both sides would have to make weighty concessions that they don’t want to make. I don’t see any other way to move forward.