Fri May 13, 2011 4:22pm EDT

WASHINGTON (Reuters) -

Middle East peace envoy George Mitchell announced his resignation on Friday, throwing a new question mark over the Obama administration's failed effort to restart direct talks between Israel and the Palestinians.

President Barack Obama called Mitchell "one of the finest public servants that our nation has ever had" and said his deputy, David Hale, would step in as acting peace envoy after Mitchell's departure.

In his brief resignation letter, Mitchell said he had already worked beyond the two years he originally intended and would therefore step down effective next Friday.

"I trust this will provide sufficient time for an effective transition," he said in the letter released by the White House.

Mitchell's exit coincides with a closely watched visit to the White House by Israeli Prime Minister Benjamin Netanyahu next Friday, one day after Obama delivers a speech on his Middle East strategy as political turmoil upends decades of U.S. policy in the region.

Obama is not expected to offer fresh ideas to tackle the Israeli-Palestinian dispute. Mitchell, 77, had become a symbol of his administration's frustrated ambitions in that arena.

A former U.S. senator who helped broker the Northern Ireland peace deal, Mitchell was one of the first members named to Obama's foreign policy team. He shuttled between Washington and Middle East capitals in an unsuccessful bid to launch new negotiations.

There were glimmers of hope. Obama himself presided over the resumption of direct peace talks in September, but the negotiations broke down within weeks over Jewish settlement construction on occupied land in the West Bank.

Faced with a deadlock, the United States in December scrapped efforts to relaunch direct peace talks. Mitchell has not visited the region since.

Obama has recently made changes to his Middle East policy team and nominated Daniel Shapiro, a senior adviser who has helped shape the response to the Middle East upheaval, to be the new U.S. ambassador to Israel.

The shifts come as pressure mounts on Obama to forge a new peace push or face the prospect of the Palestinians seeking the U.N. General Assembly's blessing for a Palestinian state in September -- a move certain to complicate the situation.

Netanyahu will address the U.S. Congress on May 24, and some Israeli reports have suggested he may float new ideas on restarting the peace talks, although he has given no indication he plans to do so.

WHEN PERSEVERANCE IS NOT ENOUGH

Mitchell was known as a consummate diplomat, and frequently cited the arduous Northern Ireland peace talks as proof that perseverance was essential when seeking to bridge deep historical divides.

"I don't underestimate the difficulty of this assignment," Mitchell said when his appointment was announced on January 22, 2009, two days after Obama took office.

"Conflicts are created, conducted and sustained by human beings. They can be ended by human beings," Mitchell said. "I believe deeply that with committed, persevering, and patient diplomacy, it can happen in the Middle East."

But events played out differently.

Palestinian President Mahmoud Abbas and Israel's Netanyahu, with an eye to their respective political bases, proved immovable on key points. Despite repeated urging by Obama, U.S. Secretary of State Hillary Clinton and Mitchell himself, the process ground to a halt.

The outlook darkened further when Abbas' Fatah movement and its rival, the Islamist group Hamas, signed a surprise unity deal last month, drawing a cool response from Washington and denunciations from Israel, which says it cannot talk with Hamas while that group remains officially committed to the country's destruction.

"The resignation is not a major surprise. People were asking not if, but when," said Brian Katulis, a security expert at the Center for American Progress think tank, which has close ties to the White House.

"They have a lot of moving parts on Middle East policy right now. I would be surprised if there were a major new initiative on Middle East peace, especially after the Palestinian unity deal."

White House spokesman Jay Carney said on Friday that Obama's commitment to Mideast peace "remains as firm as it was when he took office ... this is a hard issue."

But in the past three months, his administration has grappled with an extraordinary wave of political unrest that unseated U.S. allies in Egypt and Tunisia, led to a sharp crackdown in Bahrain and a civil war in Libya -- forcing a much broader rethinking of U.S. Mideast strategies.

(Additional reporting by Arshad Mohammed and Matt Spetalnick; Editing by Warren Strobel and Peter Cooney)