In a speech at the opening session of the 22nd Arab Summit, the UN chief said the significance of Jerusalem should be respected as a capital for both Israel and the future Palestinian state.
"Whatever our concerns, there is no alternative to negotiations for a two-state solution," Ban said.
"Jerusalem's significance to all must be respected, and it should emerge from negotiations as the capital of two states."
He also urged the Arabs to support proximity talks between the Palestinians and the Israelis to lead to direct negotiations to end the conflict, expressing his concern of the recent Israeli escalation of hostility in the besieged Gaza Strip.
"I urge you to support efforts to start proximity talks and direct negotiations. Our common goal should be to resolve all final status issues within 24 months," he said.