By Jeffrey Heller and John Irish

JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu criticised a French-led peace initiative on Sunday, accusing foreign powers of trying to dictate terms to Israel for a deal with the Palestinians.

French Foreign Minister Laurent Fabius, on a two-day visit to the Middle East, said the aim was not for foreign powers to intevene directly in negotiations, and warned of the dangers of continued stalemate.

Fabius wants to see the Israeli-Palestinian peace process, which collapsed in 2014, relaunched through an international support group comprising Arab states, the European Union and U.N. Security Council members.

"Peace will only come from direct negotiations of the two parties and without conditions. It will not come from U.N. resolutions that are sought to be imposed from the outside," Netanyahu said at a joint news conference with Fabius.

He accused the Palestinians of avoiding direct talks, and then said that "if they (other powers) attempt to impose terms on Israel, this attempt will fail and drive peace away".

Fabius rejected the idea that terms would be imposed from outside, saying after the meeting: "We do not intend to shuffle into the dimension of the negotiations. It is up to the negotiators of the parties to discuss, but that doesn't mean there can't be international support."

Fabius said he felt a will to restart negotiations on both sides, and would consult with the European Union, the United States and Russia to gauge their appetite for the initiative.

Earlier, after meeting his Palestinian counterpart Riyad al-Maliki in the West Bank city of Ramallah, Fabius had said the conflict could be "set ablaze" if there was no movement toward peace.

France has so far focused with Arab states on a possible U.N. Security Council resolution that would set negotiating parameters and establish a timeframe, possibly 18 months, to complete talks.

In December, the United States voted against a Palestinian-drafted resolution calling for an Israeli withdrawal from the occupied West Bank and East Jerusalem and the establishment of a Palestinian state by late 2017.

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But this month, U.S. President Barack Obama said the absence of a peace process and the conditions raised by Netanyahu for Palestinian statehood would make it hard for Washington to continue to defend Israel at the United Nations.

Maliki voiced support for the French initiative, saying Palestinians "need a commitment from the major powers and those with a direct interest".

(Additional reporting by Ali Sawafta; Writing by Allyn Fisher-Ilan; Editing by Kevin Liffey)