"I think they're finishing it up," Nikki Haley said, when asked about formulations of a Middle East peace proposal during an appearance at the University of Chicago Institute of Politics.

The news came a day after President Donald Trump's two top envoys on the Middle East, son-in-law Jared Kushner and adviser Jason Greenblatt, met with UN Security Council ambassadors and asked for their support of the upcoming peace plan.

"They're still going back and forth," Haley said, without offering specifics of when a proposal might be unveiled.

"The plan won't be loved by either side. And it won't be hated by either side. But it's a template to start talking," she said.

The revelations came after questioning by the academic institute's chief David Axelrod -- a former senior advisor to Trump's predecessor Barack Obama -- about the US's controversial decision to declare Jerusalem as Israel's capital.

"Congress had overwhelmingly voted to name Jerusalem the capital of Israel and to put our embassy in the capital," Haley said.

She said multiple presidents had struggled with a "fear doctrine that the sky was going to fall" if such a declaration was made.

"The sky is still up there," she said. "And now what we have is a time where the negotiations can start between Israelis and Palestinians."

Palestinian leader Mahmud Abbas on Wednesday called for an international conference to be held by mid-2018 to launch a wider peace process in which the United States would not have the central mediating role.