UNITED NATIONS - The Obama administration Friday cast its first-ever veto in the U.N. Security Council, blocking a Palestinian-backed draft resolution that denounced Israel's settlement policy as an illegal obstacle to peace efforts in the Middle East.

The U.S. vote killed off a measure that was supported by the 14 other members of the Security Council and isolated the United States on a crucial Middle East matter at a time of political upheaval in the region.

Although U.S. officials have consistently criticized the settlement policy, a vote in favor of the resolution would have angered Israel and its U.S. supporters, including Republican lawmakers, who had urged the Obama administration to stand with Israel at all costs.

After the vote, U.S. Ambassador Susan E. Rice sought to play down U.S. differences with the rest of the U.N. membership, saying the administration's veto should "not be misunderstood to mean we support settlement activity."

"For more than four decades, Israeli settlement activity in territories occupied in 1967 has undermined Israel's security and corroded hopes for peace and stability in the region," Rice told the council. "Continued settlement activity violates Israel's international commitments, devastates trust between the parties and threatens the prospects for peace."

But, Rice said, the adoption of the resolution would risk "hardening the positions of both sides."

In September, President Obama electrified the U.N. membership in his address to the General Assembly by expressing hope that, sometime this year, a new agreement could lead to a sovereign Palestinian state being welcomed into the United Nations. But Friday, the administration stood far apart from even its closest allies. Britain, France and Germany issued a joint statement arguing that the resolution would have advanced the peace process.

It was the first time the U.S. government has used its veto in the Security Council since 2006, when the George W. Bush administration vetoed a resolution calling for a halt to Israeli military operations in the Gaza Strip. Arab diplomats warned that the repercussions of the U.S. veto would be worse this time, exacerbating the political crisis in the Middle East and hardening attitudes toward the United States. The resolution had more than 120 co-sponsors.

"This veto is not going to help the peace process, and it is going to complicate things in the Middle East," said Nabil Abu Rudeineh, spokesman for Palestinian President Mahmoud Abbas. "It comes at a very dangerous time. The whole area is boiling, and this American attitude is not going to help stabilize the region."

In a statement, Israeli Prime Minister Binyamin Netanyahu expressed his government's appreciation for the American vote.

"Today's decision by the U.S. makes it clear that the only path to such a peace will come through direct negotiations and not through the decisions of international bodies," Netanyahu said.

The vote Friday brought an end to a last-minute and ultimately failed diplomatic campaign to persuade the Palestinians to drop their resolution in favor of a milder statement rebuking Israel for constructing new settlements in seized Arab lands.

Obama discussed the issue with Abbas, and the administration offered to support a presidential statement saying that Israel's ongoing settlement activities lacked legitimacy. Among other measures, the administration also pledged to consider undertaking the first visit by the U.N. Security Council to the Middle East since 1979.

Special correspondent Joel Greenberg in Jerusalem contributed to this report.