The 1979 Egypt-Israel Peace Treaty stipulated that Egypt would cease attacks on Israel, and in return Israel would withdraw from the Sinai peninsula. This kind of trade-off became known as "land for peace." The Egypt case was unique. Both sides had fought to exhaustion, and both Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin were in danger of losing a popular mandate. But most importantly, the conflict had already resulted in an Israeli military victory. Giving back the Sinai was a way to maintain a peace that already existed.
In the 1993 Oslo accords, Israel made the mistake of agreeing to land for peace with the Palestinian Liberation Organization (PLO) under the leadership of Yasser Arafat. It failed for two reasons. First, peace is ambiguous. It's hard to accuse Palestinians of violating the peace when there's no agreement about what exactly peace is. Second, peace is reversible. Re-taking land involved a much higher cost for Israel than restarting violence did for Palestinians.
In the current flailing negotiations (see here for an explanation why), Israel is making the same mistake it made with land for peace. "Pursuing unilateral international recognition of a Palestinian state" is also ambiguous and reversible. It's difficult to say exactly what "pursuit" entails, and it's something the Palestinian Authority can always do in the future. Even if a deal were to be signed, Israel's condition that the Palestinians not pursue peace would be a sword of Damocles over future interactions.
If Israel really wants the Palestinians not to pursue unilateral recognition, it should address these efforts by offering elements of recognition in return for tangible concessions that bolster its security. Israel may not believe such recognition is deserved, but neither is perpetuating the conflict upon another generation of Israelis. Israel also faces an international community which is increasingly sympathetic to the Palestinian cause. Managing this tide is good policy. But trying to stave it off entirely is a losing battle.