Netanyahu's speech echoed remarks of Israeli 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."

An Israeli soldier salutes during a state ceremony marking Jerusalem Day, which celebrates the conquest of East Jerusalem during the 1967 Six Day War, in east Jerusalem, May 21, 2009. [Yin Bogu/Xinhua]

In response to Netanyahu's words, Palestinian negotiator Saeb Erekat said that the Israeli prime minister's position on Jerusalem was a setback to the goal of a two-state solution, which is strongly supported by the Obama administration.

"Netanyahu, by saying that, he is saying the state of conflict will be eternal," Erekat said.

Also on Thursday, hundreds of east Jerusalem Arabs protested against Jerusalem Day celebrations in the city, according to local daily The Jerusalem Post.

Demonstrators waving flags of the Palestinian National Authority shouted slogans to condemn the Jewish occupation.

An Israeli soldier stands attention during a state ceremony marking the Jerusalem Day, which celebrates the conquest of East Jerusalem during the 1967 Six Day War, in east Jerusalem, May 21, 2009. [Yin Bogu/Xinhua]

Participants lambasted "the myth of the city's unity" and said Israel must "awaken from the fantasy of unity" of Jerusalem. They said east Jerusalem's annexation to Israel in the wake of the Six Day War was illegal.

Protestor Inad Muhammad Surhi from the Jabal Mukaber neighborhood, told local news service Ynet that "We are here to say one thing: Jerusalem has never been united. Look at the difference between west Jerusalem and the east, you will see that there is no equality in the city."

"We are here to say that we want Jerusalem to be the capital of two states and that's all. Only then will there be peace for both us and you," said Surhi.

Jerusalem City Council member Meir Margalit, who is from the left-wing Meretz party, was present at the protest, saying that "I am here because I feel that there is a big lie that has been going on for 42 years, and it is called the unification of the city."

"Someone must burst this bubble. The city is not united; on the contrary, it is more divided than ever," he said, adding that Jerusalem Day is not a holiday for all the city's residents.

"Calling it 'Jerusalem Day', as if all the residents are happy with the situation, is a big lie. It could be called 'Jerusalem Day for the Jews'," said Margalit.

(Xinhua News Agency May 22, 2009)