Israel's approval of more than 1,300 new homes in occupied east Jerusalem sparked fury from the Palestinians, who accused Israel of sabotaging peace talks, and disappointment in Washington.
The plans were announced as Israeli Prime Minister Benjamin Netanyahu was in the United States to discuss a revival of peace talks.
"We thought that Netanyahu was going to the United States to stop settlement activity and restart negotiations but it is clear to us that he is determined to destroy the talks," chief Palestinian negotiator Saeb Erakat told AFP.
|Palestinian labourers work in October 2010 at the construction site for 50 housing units in the West Bank settlement of Ariel|
"He has shut all the doors to negotiations and we hold him responsible for destroying them."
US State Department spokesman PJ Crowley told reporters Washington was "deeply disappointed by the announcement of advanced planning for new housing units in sensitive areas of east Jerusalem."
He called the move "counterproductive to our efforts to resume direct negotiations between the parties," and said it would be a talking point when Secretary of State Hillary Clinton meets Netanyahu in New York on Thursday.
UN Secretary General Ban Ki-moon expressed concern to Netanyahu about the new settlement plans, a UN spokesman said.
Ban "expressed concern at the resumption of the settlement activity and recent announcements of further settlement construction in east Jerusalem."
The secretary general also "expressed hope for further measures by the government of Israel to ease the movement of people and goods to and from Gaza."
Direct peace talks which began in early September quickly ran aground when an Israeli moratorium on West Bank settlement construction expired six weeks ago, prompting the Palestinians to freeze ties until Israel reimposes the ban.
Although the 10-month moratorium did not cover building projects in east Jerusalem, Israel has quietly held off from approving projects there in order to avoid political fallout.
Peace Now's Hagit Ofran said the government had published three plans for public review, which includes 1,025 new housing units in Har Homa, a particularly contentious settlement neighbourhood on Jerusalem's southern outskirts, and another 320 units in the northern district of Ramot.
"This is a new stage in Har Homa which really extends it," Ofran said. "It is a big provocation at a very sensitive time in the negotiation process."
Ofran said the timing of the announcement was not accidental as the plans had been readied to put forward for public scrutiny since July 2008.
"It seems to be a calculated attempt by Netanyahu to torpedo peace talks and also avoid blame, by forcing the Palestinians to be the ones to walk away from the negotiation table," she said.
Building work at Har Homa began in 1997 during Netanyahu's first term as premier, in a move which led to the breakdown of previous peace talks.
Netanyahu on Monday urged Palestinians to return to the negotiating table.
He told a gathering of the Jewish Federations of North America in New Orleans that the Palestinians should stop imposing preconditions on a resumption of direct talks.
"If you want to live peacefully next to us come and negotiate peace with us. Palestinian leaders who genuinely want peace should stop placing preconditions and start negotiating peace," he said.
In a separate development, plans were also approved on Monday for 32 more homes in Pisgat Zeev East, another settlement neighbourhood, a spokeswoman for Israeli rights group Ir Amim told AFP.
Interior ministry spokeswoman Efrat Orbach told AFP the plans for building in Har Homa and Ramot had been signed off six months ago, but details were only made public late last week when an official notice appeared in two newspapers.
"Anybody who wants to object has 60 days in which to do so," she said, pointing out that it was the beginning of a long process which could take several years to materialise.
"Maybe in a few years somebody will actually move in there."
Israel does not consider Har Homa, Ramot or Pisgat Zeev East to be settlements because they are within Jerusalem's municipal boundaries, drawn up after Israel captured and annexed the mostly Arab east of the city in 1967.
The move was not recognised by the international community or the Palestinians, who consider east Jerusalem to be the capital of their promised state.
Israeli-Palestinian peace talks face imminent collapse in the row about settlement building on occupied land, which restarted on September 26 after temporary restrictions expired.
Until now, Netanyahu has refused to contemplate a new temporary freeze on West Bank construction, largely because he lacks support for such a move within his right-wing coalition.
The Palestinians see the settlements as a major threat to the establishment of a viable state, and view the freezing of settlement activity as a crucial test of Israeli intentions.