US Secretary of State John Kerry says if the Palestinian Authority collapsed it would be a threat to Israel.
Since October 1, almost daily assaults and clashes between Palestinians and Israeli soldiers and violence between Palestinians and Israeli settlers have killed 109 Palestinians, including an Israeli Arab, 17 Israelis, an American and an Eritrean, according to an AFP count.
Israeli officials privately accept that the violence is likely to continue.
Palestinians are frustrated by the failure of decades of peace talks and the ongoing occupation of the West Bank and east Jerusalem, with many also losing faith in the leadership of president Mahmud Abbas.
"President Abbas spoke more despairingly, my friends, than I have ever heard him about the sense of hopelessness that the Palestinian people feel," Kerry, who travelled to the region last month, said in a speech at the Brookings Institution.
He added that the level of distrust between the two sides "has never been more profound", calling for an end to the violence before it worsens yet again.
"Without the PA security forces, the IDF (Israel Defense Forces) could be forced to deploy tens of thousands of soldiers to the West Bank indefinitely to fill the void," Kerry said.
"Are Israelis prepared for the consequences this would have for their children and grandchildren who serve in the IDF when the inevitable friction leads to confrontation and violence?"
The top US diplomat also hit out at the building of settlements by Israel on land Palestinians see as part of their future state.
"The continued settlement growth raises honest questions about Israel's long-term intentions and will only make separating from the Palestinians much more difficult," he said.
