"We have to have a contiguous and cohesive Palestinian state that functions effectively," he told CNN.
"There are a whole host of areas where I think there's going to have to be compromise on both sides," he added.
He meanwhile took a jab at President George W. Bush for not actively pursuing an Israeli-Palestinian peace deal until this year, the final year in Bush's presidency.
"The Middle East peace process is so important that we can't reserve it to the end of a presidency.
"We've got to start soon and I'm going to be absolutely committed to making that happen" if elected president, Obama said.
© 2008 Agence France-Presse