JERUSALEM, April 7 (Reuters) - Israel and the United States remain divided on Jewish settlement construction although the gap has narrowed in some areas, Prime Minister Benjamin Netanyahu said on Wednesday after consulting senior cabinet members.

Netanyahu and cabinet ministers have been weighing a response to US opposition to housing construction for Jews in occupied areas in and near Jerusalem and Washington's call for steps to persuade Palestinians to return to peace talks.

At a news conference to sum up a year in office, Netanyahu gave no sign that an end to the settlement dispute, which has strained relations between Israel and its main ally, was near.

We are in continuing discussions, Netanyahu said, referring to a dialogue with US President Barack Obama's administration.

I am not saying we don't have disagreements. There are things we agree on, there are things we don't agree on. There are matters where we are narrowing the gaps, he said, without elaborating.

We are making an effort to act in coordination because we and the United States have deep common interests and values, said Netanyahu, who will travel to Washington on Monday for a nuclear security conference.

Israeli media reports have said Obama, whose low-profile meeting with Netanyahu last month was widely seen as a sign of displeasure over settlement activity, was seeking a four-month building freeze in East Jerusalem.

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A senior Israeli government official said Netanyahu does not intend, during his coming US visit, to deliver a formal response to US demands for Israeli confidence-building steps to try to revive peace talks suspended since December 2008.

The official spoke on condition of anonymity after Netanyahu met his security cabinet.

The White House said Obama had no plans during the conference to meet Netanyahu or other foreign leaders whom the president had seen recently.

The Palestinian Authority has demanded a halt to Israeli settlement building in East Jerusalem and the West Bank, territory Israel captured in a 1967 war, before any resumption of negotiations.

Citing historical and Biblical links, Israel regards all of Jerusalem as its capital, a claim not recognised internationally. Palestinians want East Jerusalem as their capital and say settlements will deny them a viable state.

Under US pressure, Netanyahu, who heads a government dominated by pro-settler parties, including his own, imposed a 10-month construction freeze on West Bank settlement in November, but excluded East Jerusalem.