Kushner said in an interview with Al Jazeera that the deal lies between the initiative and the Israeli position on the matter.
"I think we all have to recognise that if there ever is a deal, it's not going to be along the lines of the Arab peace initiative. It will be somewhere between the Arab peace initiative and between the Israeli position," he said.
As part of the Arab Peace Initiative, Arab states led by Saudi Arabia have called for a Palestinian state drawn along borders that pre-date Israel's capture of territory in a 1967 war with a capital in east Jerusalem and the right of return for refugees, points rejected by Israel.
"All of the people I speak to, they talk about the Arab Peace Initiative, and again it was a great effort, but if that was where a deal was going to be made a deal would have been made a long time ago," said Kushner.
Kushner is to present the economic portion of Washington's long-awaited Arab-Israeli peace plan, with a $50 billion development plan being unveiled this week. Washington has said it would unveil the political portion of the plan later in order not to give an upper hand to any party during the Israeli elections.