"The Israeli and Palestinian people face a shared fate on shared land. There is no erasing the other," Ban told a UN committee on Palestinian rights.
He called "on the parties to step back from the brink and find the path of peace before hope and time run out."
His comments reflected international alarm over the spate of violent attacks in east Jerusalem and the deadlock over peace talks that are fueling fear of another flareup after the 50-day war in Gaza.
Ban said Israelis and Palestinians appeared to be "losing any sense of connection" and that "when that goes, it is not far over the precipice."
With no political solution in sight, governments and parliaments in Europe are moving toward Palestinian recognition, with France's National Assembly set to debate a non-binding resolution on Friday followed by a vote on December 2.
The Palestinians have yet to formally submit to the UN Security Council a UN draft resolution calling for an Israeli withdrawal from all occupied territory in 2016.
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