He proposed an independent Palestinian state and the recognition of Israeli sovereignty over West Bank settlements.
Standing alongside Israeli PM Benjamin Netanyahu at the White House, Mr Trump said his proposals "could be the last opportunity" for Palestinians.
Palestinian President Mahmoud Abbas dismissed the plans as a "conspiracy".
"I say to Trump and Netanyahu: Jerusalem is not for sale, all our rights are not for sale and are not for bargain. And your deal, the conspiracy, will not pass," he said in a televised address from Ramallah in the West Bank.