* Abbas's Fatah movement holds first congress in 20 years
* Peace the goal but "resistance" to stay an option
* Israel says U.S. peace plan due in weeks
(Updates with Israel on U.S. peace plan, edits)
By Mohammed Assadi
BETHLEHEM, West Bank, Aug 4 (Reuters) - President Mahmoud Abbas told his Fatah movement's first congress in 20 years on Tuesday that Palestinians sought peace with Israel but "resistance" would remain an option.
Strengthening the democratic credentials of the Western-backed leader under challenge by Hamas Islamists is part of a drive to revive a peace process by U.S. President Barack Obama, who is expected to present a new plan within weeks.
"Although peace is our choice, we reserve the right to resistance, legitimate under international law," Abbas said in a policy speech opening the congress, using a term that encompasses armed confrontation as well as non-violent protests.
Officials said a draft of Fatah's programme called for new forms of resistance, such as civil disobedience, against Jewish settlement expansion and a West Bank barrier Israel says is for security but which Palestinians see as a land grab.
The draft leaves the option of "armed struggle" on the charter of Fatah if talks with Israel fail, and does not rule out a unilateral declaration of statehood in the West Bank and Gaza Strip if negotiations remain at a stalemate.
But Abbas stressed to the congress that Fatah had endorsed the 1993 Oslo Accords which specifically recognise Israel, and was abiding by all of its obligations under the 2003 "road map" to peace and a two-state agreement with Israel.
Asked about Abbas's reference to "resistance", Mark Regev, a spokesman for Israeli Prime Minister Benjamin Netanyahu said: "Israel seeks historic reconciliation with our Palestinian neighbours -- we want peace and the best way to achieve that is around the negotiating table."
Israeli Defence Minister Ehud Barak, who has held a series of meetings with Obama's Middle East envoy George Mitchell, said Israel should accept a plan Mitchell was expected to present to the parties "in the coming weeks".
"I believe that Israel must take the lead in accepting the plan," he was quoted as telling Israel's Foreign Affairs and Defence Committee. He gave no details of its likely contents.
Tight security was in place as more than 2,000 delegates convened in a Christian school near the Church of the Nativity, Jesus's traditional birthplace, for the first Fatah congress since a gathering in Tunis in 1989.
Bemused Christian pilgrims threaded through lines of riot police and between knots of heavily armed special forces troops as the movement held its first congress on Palestinian soil.
More than 300 Fatah delegates living in the Gaza Strip were banned from going to Bethlehem by Gaza's ruler, Hamas, whose fighters kicked Fatah out of the enclave in 2007.
Despite months of reconciliation efforts by Egyptian mediators, the two factions remain mutually hostile.
Abbas said neither Hamas nor any other Palestinian faction had the right to choose on its own what future "resistance" against Israeli occupation should entail.
"No one can ... take us to where we do not want be," he said, echoing past criticism of Hamas suicide attacks which many believe hurt the Palestinian cause.
But Abbas also cautioned that Palestinians would not give up a right to meet violence with violence, saying: "We will not stand helpless in the face of Israeli incursions."
In Gaza, Hamas official Ayman Taha said the speech reflected "a sick mentality representing a narrow factional vision".
Fatah over the next two days aims to elect a new central committee and ruling council, in hope of giving more of a say to a younger generation that grew up fighting Israel's occupation of the West Bank since it captured the territory in a 1967 war.
(Additional reporting by Ali Sawafta in Bethlehem, Nidal al-Mughrabi in Gaza and Ori Lewis in Jerusalem, Writing by Jeffrey Heller and Douglas Hamilton. Editing by Michael Roddy) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to