CAIRO (Reuters/AFP) - US President Barack Obama on Thursday vowed to forge a new beginning for Islam and America in a landmark speech to the worlds Muslims, evoking a vision of peace after a smouldering cycle of suspicion and discord. In what may be a defining moment of his presidency, Obama laid out a new blueprint for US Middle East policy, vowing to end mistrust, forge a state for Palestinians and defuse a nuclear showdown with Iran. So long as our relationship is defined by our differences, we will not empower those who sow hatred rather than peace, said Obama, who was greeted with a standing ovation as he stepped up to the podium at Cairo University. Obama said that violent extremists had exploited tensions between Muslims and the West, and that Islam was not part of the problem but part of promoting peace. Violent extremists have exploited these tensions in a small but potent minority of Muslims, Obama said adding that the United States and Islam need not be in competition. Islam is not part of the problem in combating violent extremism - it is an important part of promoting peace, he said. Obamas long-awaited speech fulfilled a campaign promise and came after he held talks in Saudi Arabia Wednesday with King Abdullah and Thursday with Egyptian President Hosni Mubarak aimed at reviving Middle East peace moves. In the universitys imposing domed Great Hall, Obama said the US bond with Israel, the source of much Arab distrust of the United States, was unbreakable, and rejected ignorant rants by those who deny the Nazi Holocaust. But, breaking from policies of his predecessor George W Bush, Obama also rebuked Prime Minister Benjamin Netanyahus refusal to halt West Bank settlement expansion and reiterated his backing for a two-state solution. Obama said he would pursue a two-state solution as the only way to end the Palestinian-Israeli conflict, addressing an issue prioritised by many in the Muslim world. Many see Washington as one-sided in its backing of Israel. The only resolution is for the aspirations of both sides to be met through two states, where Israelis and Palestinians each live in peace and security, Obama said. That is why I intend to personally pursue this outcome with all the patience that the task requires. Obama called on Israelis and Palestinians to revive stalled peace talks, demanding Palestinians halt violence and Israelis to ease the plight of those in the occupied territories. Too many tears have been shed. Too much blood has been shed. America will not turn our backs on the legitimate Palestinian aspiration for dignity, opportunity, and a state of their own, Obama said, calling on both sides to live up to obligations under the stalled roadmap for Middle East peace. I have come here to Cairo to seek a new beginning between the United States and Muslims around the world, Obama said in a speech targeting the globes 1.5 billion Muslims on television, the Internet and on social networking sites. This cycle of suspicion and discord must end, said Obama vowing to fight negative stereotypes of Islam wherever they appear. But that same principle must apply to Muslim perceptions of America, he said, and touched on contentious regional like democracy and womens rights. Quoting the regions three holy books, the Quran, the Torah and the Bible, he evoked a future of mutual interest and mutual respect, examining all sources of tension between America and the Muslim world. The US president, laying out an ambitious foreign policy, to match the audacity of his domestic programme, spoke directly to Muslims on their arguments with America. In so doing, he was attempting to cleanse the soiled US image in the Muslim world, including in over the Iraq war, the Abu Ghraib abuse scandal and the Guantanamo Bay war on terror camp. Specifically targeting young Muslims, Obama said, I know there are many - Muslim and non-Muslim - who question whether we can forge this new beginning. Some are eager to stoke the flames of division, and to stand in the way of progress. Some suggest that it isnt worth the effort - that we are fated to disagree, and civilizations are doomed to clash. There is so much fear, so much mistrust. But if we choose to be bound by the past, we will never move forward. The US president also renewed his offer for dialogue without preconditions with arch-US foe Iran, over, after a decades-long Cold War style conflict. It will be hard to overcome decades of mistrust, but we will proceed with courage, rectitude and resolve, Obama said. It is clear to all concerned that when it comes to nuclear weapons, we have reached a decisive point, he said warning a regional arms race would be a hugely dangerous path but saying Iran had the right to nuclear peaceful power. Obama also weaved his own biography, with Islamic lineage among family members in Kenya, and several years growing up as a boy in Indonesia, into his search to pick out a new path for the United States and Islam . And in his own warning to the Muslim world, Obama said United States would never tolerate violence, citing the trauma of the September 11 attacks in 2001, though saying his country lost its way with harsh war on terror tactics. US President said his country does not want to keep its troops in Afghanistan. Make no mistake: we do not want to keep our troops in Afghanistan. We seek no military bases there. We would gladly bring every single one of our troops home if we could be confident that there were not violent extremists in Afghanistan and Pakistan determined to kill as many Americans as they possibly can. But that is not yet the case. Obama, however, said his countrys commitment to fulfil its role as part of a 46-country coalition will will not weaken despite the costs involved. It is costly and politically difficult to continue this conflict, he said. We also know that military power alone is not going to solve the problems in Afghanistan and Pakistan. He added the US plans to invest 1.5 billion dollars each year over the next five years in construction and aid money to the displaced in Pakistan, and 2.8 billion dollars to help Afghans develop their economy. Obama promised that the United States would encourage more educational exchanges with the Muslim world and invest in technological development. The president said education and innovation will be the currency of the 21st century, and in too many Muslim communities there remains underinvestment in these areas. In response, he promised to expand (educational) exchange programmes, and increase scholarships, like the one that brought my father to America, while encouraging more Americans to study in Muslim communities. He said the United States would create a new class of science envoys and open centres of excellence in the Africa, the Middle East and Southeast Asia. These would seek to collaborate on programmes that develop new sources of energy, create green jobs, digitise records, clean water and grow new crops.