The US vice-president, Joe Biden, has delivered an unusually sharp critique of the government of Binyamin Netanyahu, saying the Israeli prime minister is leading Israel in the wrong direction through his policies, including settlement building.

Biden described the Obama administration’s “overwhelming frustration” with Israel, adding that “profound questions” existed about how the country could remain both Jewish and democratic.

Although Biden’s comments, made in a speech to the Jewish American group J-Street, also criticised Palestinians for the failure of the last round of Middle East peace talks, his remarks about the Netanyahu government were particularly pointed.

“I firmly believe that the actions that Israel’s government has taken over the past several years – the steady and systematic expansion of settlements, the legalisation of outposts, land seizures – they’re moving us and more importantly they’re moving Israel in the wrong direction,” Biden said.

His remarks appear to have scotched the notion that relations between Israel and its most significant backer – which have been unusually strained – were returning to normal after the deep frictions over the Iran nuclear deal.

Biden insisted, however, that the US remained committed to Israel’s security.

“No matter what political disagreements we have with Israel – and we do have political disagreements now – there is never any question about our commitment to Israel’s security.”

Biden’s comments will concern senior Israeli politicians. They have been fretting over what stance the US might take over a mooted resolution at the UN security council, being pushed by Palestinians, seeking to condemn Israel’s continued construction of illegal settlements.

Although Biden’s remarks echoed both public and private comments in recent months made by senior American officials, their high-profile nature is significant, not least because they come in the midst of stalled negotiations between the US and Israel over a military aid package with demands from Israel for more aid than the US is willing to give.

“Israel will not get everything it asks for, but it will get every single solitary thing it needs,” Biden remarked.

The US vice-president also added his voice to the increasing number of international figures warning that Israelis and Palestinians were heading towards a “dangerous” one-state “reality” – and the effective death of a two-state solution.

In March, Biden met both Netanyahu and the Palestinian president, Mahmoud Abbas. He said he came away from that trip discouraged about prospects for peace anytime soon, adding it was the US’s obligation to “push … as hard as we can” towards a two-state solution despite “our sometimes overwhelming frustration with the Israeli government”.

Biden added: “There is at the moment no political will that I observed from either Israelis or Palestinians to go forward with serious negotiations.

“Both sides have to take responsibility for counterproductive steps that undermine confidence in negotiations.”

Biden also singled out Palestinian leaders, including Abbas, for declining to condemn specific acts of terrorism carried out against Israelis, in a nod to the seven-month wave of Palestinian stabbings and other attacks. He said he didn’t know whether Monday’s bus explosion in Jerusalem was a terrorist attack, but added that the US condemns “misguided cowards” who resort to violence.

“No matter what legitimate disagreements the Palestinian people have with Israel, there is never justification for terrorism,” Biden said. “No leader should fail to condemn as terrorists those who commit such brutalities.”