JERUSALEM - A two-state solution to the Israeli-Palestinian conflict is slipping away, the UN special coordinator for Middle East peace warned on Sunday, after both sides shrugged off criticism by international mediators.

A report released on Friday by the so-called Quartet - United States, European Union, United Nations and Russia - called on Israel to stop its policy of building settlements on occupied land and restricting Palestinian development.

Israeli policy “is steadily eroding the viability of the two-state solution,” it said. It also urged the Palestinian Authority, which exercises limited self-rule in the West Bank, take steps to end incitement to violence against Israelis, condemn “all acts of terrorism” and do more to combat them.

“The Quartet report sounds an alarm bell that we are on a dangerous slope towards a one-state reality that is incompatible with the national aspirations of both peoples,” wrote Nickolay Mladenov, UN special coordinator for the Middle East peace process, in a commentary emailed to journalists on Sunday.

He also addressed Palestinian and Israeli criticism of the Quartet report. “Who will make the argument that more cannot be done to end incitement?” he asked. “Can anyone question that illegal settlements ... are not undermining the prospect for a two-state solution?”

Israel welcomed parts of the Quartet report but signalled no change in settlement building, saying the document “perpetuates the myth that Israeli construction in the West Bank is an obstacle to peace”.

Meanwhile, a Turkish ship carrying aid for Gaza arrived in Israel Sunday, a week after the two countries agreed to restore ties that soured over a deadly raid on an aid flotilla.

The Lady Leyla container vessel docked at Ashdod port in the afternoon after departing on Friday, an AFP journalist reported.

Its contents were to be unloaded, inspected and sent on to the Hamas-run Gaza Strip, hit by three wars with Israel since 2008 and under an Israeli blockade.

The Panama-flagged ship was carrying 11,000 tonnes of supplies including food packages, flour, rice, sugar and toys, the Turkish state-run Anadolu news agency reported.

Turkey had initially pushed for a lifting of Israel’s blockade on Gaza as part of the negotiations to normalise ties, but Israel rejected this.

A compromise was eventually reached allowing Turkey to send aid through Ashdod rather than directly to the Palestinian enclave.

Israel says the blockade is necessary to prevent Islamist movement Hamas from receiving materials that could be used for military purposes, but UN officials have called for it to be lifted, citing deteriorating conditions in the territory.

Turkey’s ruling Islamic-rooted AKP party has friendly ties with Gaza’s Hamas rulers, and President Recep Tayyip Erdogan has been a vocal supporter of the Palestinian cause.

Turkey and Israel were formerly close regional allies, but fell out in 2010 when Israeli commandos killed 10 Turkish activists in a raid on an aid flotilla seeking to run the blockade on Gaza.

Under the reconciliation deal, Israel will pay $20 million in compensation to the families of those killed.

Prime Minister Benjamin Netanyahu has promoted the economic benefits of restoring ties, with talk of building a pipeline to Turkey to export Israeli gas, and the need to find allies in the turbulent Middle East. The deal received a mixed response in Israel.

There were allegations that it does not do enough to push for the return of four Israelis missing in Gaza - two soldiers who have been declared dead and two civilians believed to be alive and held by Hamas. Several relatives and supporters of the soldiers’ families protested against the deal outside Ashdod port on Sunday.