Benedict celebrated Mass in St. Peter's Basilica on Sunday to mark the end of a two-week meeting of Mideast bishops, called to discuss the future of embattled Christians in the largely Muslim region.
He called freedom of religion "one of the fundamental human rights, which each state should always respect" and said the issue should be the subject of dialogue with Muslims.
The pontiff said that, while freedom of worship exists in many Mideast countries, the space given to the actual freedom to practice "is many times very limited." Expanding this space, he said, is necessary to guarantee "true freedom to live and profess one's faith."
The exodus of the faithful from the birthplace of Christianity has been a major theme of the meeting, which gathered about 185 bishops from Latin and Eastern rite Catholic churches across the region and from the diaspora. In addition, two imams and a rabbi were invited to address the synod.
The Catholic church has long been a minority in the Middle East but its presence is shrinking further as a result of conflict, discrimination and economic problems.
Benedict said many Christians living in the Middle East are in discomfort either because of poor economic conditions or because of the "discouragement, the state of tension and sometimes of fear" they live in.
"Peace is possible. Peace is urgent," Benedict said in his homily. "Peace is also the best remedy to avoid the emigration from the Middle East."
In their final communique issued Saturday, the bishops demanded that Israel accept U.N. resolutions calling for an end to its "occupation" of Arab lands, and told Israel it shouldn't use the Bible to justify "injustices" against the Palestinians.
While the bishops condemned terrorism and anti-Semitism, they laid much of the blame for the conflict squarely on Israel. They listed the "occupation" of Palestinian lands, Israel's separation barrier with the West Bank, its military checkpoints, political prisoners, demolition of homes and disturbance of Palestinians' socio-economic lives as factors that have made life increasingly difficult for Palestinians.
The Israeli Foreign Ministry spokesman criticized the bishops' statement that Israel shouldn't use the Bible to justify "injustices" against the Palestinians.
"This has never been a policy of any government in Israel so this position sounds particularly hollow," Yigal Palmor said Sunday. "Let he who has never sinned cast the fist stone."
Palmor also said Israel is the only Mideast country whose Christian population is growing, and called on Christians not to flee the region. "Israel views their presence in the Middle East as a blessing and regrets their decline in Arab countries," he said.
According to statistics he provided, there were some 151,700 Christians in Israel last year, compared with 132,000 in 1999 and 107,000 two decades ago.
Also Sunday, Benedict announced that the 2012 synod would be dedicated to the theme of evangelization. The pontiff has recently created a new Vatican office - the Pontifical Council for the New Evangelization - to revive Christianity in Europe, part of his efforts to counter secular trends in traditionally Christian countries.
Associated Press Writer Ian Deitch in Jerusalem contributed to this report.