"So I'm looking at two states and one state," said Mr Trump. "And I like the one that both parties like. I'm very happy with the one that both parties like.
"I can live with either one. I thought for a while that two states looked like it may be the easier of the two.
"To be honest, if Bibi [Mr Netanyahu] and the Palestinians, if Israel and the Palestinians are happy - I'm happy with the one they like the best."
He said it would ultimately be up to the parties themselves to reach a peace agreement.
Mr Trump was also asked about his election promise to move the US embassy from Tel Aviv to Jerusalem, which could have serious implications for any peace negotiations.
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