At their meeting in November 2007, leaders of the two sides agreed to launch immediately good-faith negotiations to try to conclude a peace treaty by the end of 2008 that resolves all outstanding issues.
"I call upon the Government of Israel and the Palestinian Authority to undertake every effort to achieve the goal of the Annapolis process," Mr. Ban writes in his annual report on the peaceful settlement of the question of Palestine, which was released today.
"Time is now running short until we reach the benchmark of the Annapolis process, and there reportedly remain significant gaps.
"Should the parties not be able to reach a peace agreement by the end of the year, it will be essential that the process not be disrupted and instead continues, with the aim of leading to the long overdue peaceful settlement of the question of Palestine as early as possible," states the Secretary-General.
He notes that while the launch of the Annapolis process injected "new hope" into efforts to reach a peaceful settlement, the period covered by the report (September 2007 through August 2008) saw a worsening of the situation on the ground in both Gaza and the West Bank.
Violence - between Israelis and Palestinians, as well as among Palestinians - claimed the lives of 35 Israelis, including four children, and 600 Palestinians, including 87 children, during the reporting period.
"Much more needs to be done to build the necessary foundations for a successful political process and for the eventual and sustainable implementation of any agreement reached," he stresses.
This includes completing stopping Israeli settlement activity and lifting restrictions on movement and access. In addition, the Palestinian Authority needs to make further progress to impose law and order.
Mr. Ban highlights in particular the situation in Gaza, which was characterized by prolonged humanitarian crisis. The Gaza crossings remained largely closed, except for imports to meet minimal humanitarian needs.
"The violence, as well as the humanitarian distress the civilian population of the Gaza Strip endured as a result of Israel's closure policy, convinced me that a new and more constructive strategy on Gaza was required," he writes.
Mr. Ban emphasized that the UN will remain engaged at the political level, including through the efforts of the Middle East Quartet, which brings together the UN, European Union, Russian Federation and the United States.
At its most recent meeting in New York - which was not covered by the current report - the Quartet reaffirmed its support for the bilateral and comprehensive Israeli-Palestinian negotiations and commended the parties for their serious and continuous efforts.
The grouping, which backs the so-called Road Map plan foreseeing a two-State solution with Israel and the Palestinians living side by side in peace, called on all Palestinians to commit themselves to non-violence and recognition of Israel.
Among other things, it also called on Israel to freeze all settlement activity, including natural growth, and to dismantle outposts erected since March 2001.