RAMALLAH, West Bank, May 8 (Reuters) - The Palestine Liberation Organization (PLO) on Saturday approved indirect talks with Israel, clearing the way for the first negotiations in 18 months and giving a boost to US peace diplomacy.

US Middle East envoy George Mitchell will conduct the talks by shuttling between Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas, Palestinian and Israeli officials said. Mitchell has spent more than a year shuttling between the leaders to revive the peace process that began in the early 1990s and has produced rounds of talks but no settlement.

There have been no negotiations since December, 2008, when Israel launched an offensive in Gaza.

The United States has sought to revive the peace process, calling the conflict a vital national security interest.

But many doubt whether the latest US effort can succeed where years of diplomacy have failed. Indirect talks are a far cry from the face-to-face negotiations of the past.

Netanyahu welcomed the resumption of peace talks.

Israel's position was and remains that the talks ought to be conducted without preconditions and should quickly lead to direct negotiations between Israel and the Palestinians, a statement from Netanyahu's office said.

Speaking after Mitchell met Abbas in Ramallah on Saturday, chief Palestinian negotiator Saeb Erekat said the Palestinians wanted to build on past negotiations.

We do not want to begin from zero, he said.

We believe the time is not for negotiations but decisions, he said, adding that an initial four months of indirect talks would focus on the issues of the borders of a future Palestinian state and security.

In Washington, State Department spokesman P.J. Crowley welcomed the PLO's decision as an important and welcome step.

Erekat said Mitchell would make a statement on Sunday including details on when the talks would start. Mitchell is due to meet Abbas again on Sunday before departing, he added.


U.S. WON'T ALLOW PROVOCATIONS, PLO SAYS

Mitchell proposed the indirect format as a way to break an impasse over Jewish settlement construction on Israeli-occupied land where the Palestinians aim to establish a state alongside Israel.

The PLO executive gave the green light in March, but the US initiative was derailed when Israel announced plans for new homes in occupied areas of Jerusalem -- a move that infuriated the Palestinians and the United States. The PLO's latest decision was taken partly due to US guarantees regarding settlement activity, its danger and the need for it to stop, senior PLO official Yasser Abed Rabbo said after the body gave its approval.

The United States will take a firm political position on any provocations that influence the path of the political process and the negotiations, he said.

Israeli officials have denied speculation that Netanyahu, who has faced unusually harsh US criticism, has promised to shelve building projects in East Jerusalem.

Israel annexed the eastern half of the city as part of its capital after capturing it, with surrounding West Bank land, in the 1967 Middle East war. World powers have never recognized the move.

The Palestinians want East Jerusalem as the capital of a state they hope to found in the West Bank and Gaza Strip.

Under U.S. pressure, Netanyahu announced in November a 10-month settlement building freeze in the West Bank, but it was not enough to draw Abbas back to negotiations.

Israeli leaders have said the Palestinians can raise core issues in the indirect talks, but only direct negotiations can resolve them. (Additional reporting by Allyn Fisher-Ilan in Jerusalem and Tom Perry; Writing by Tom Perry; editing by Maria Golovnina)