Mar. 9th (BBC News) - US Vice-President Joe Biden has condemned Israel's approval of 1,600 new homes for ultra-Orthodox Jews in East Jerusalem.
Mr Biden, in Israel as part of US attempts to kick-start the peace process, said it was "the kind of step that undermines the trust we need".
Palestinian leaders also condemned the controversial move.
Israel insisted it was a procedural step with no connection to Mr Biden's visit.
The international community considers East Jerusalem occupied territory. Building on occupied land is illegal under international law, but Israel regards East Jerusalem - which it annexed in 1967 - as its territory.
In a strongly worded statement, Mr Biden said: "I condemn the decision by the government of Israel to advance planning for new housing units in east Jerusalem.
"The substance and timing of the announcement, particularly with the launching of proximity talks, is precisely the kind of step that undermines the trust we need right now and runs counter to the constructive discussions that I've had here in Israel."
He said the Israelis and Palestinians needed to build an atmosphere to support negotiations, not complicate them, adding: "This announcement underscores the need to get negotiations under way that can resolve all the outstanding issues of the conflict."
Mr Biden said the US recognised that Jerusalem was a deeply important issue for Israelis and Palestinians, and for Jews, Muslims and Christians.
"We believe that through good faith negotiations, the parties can mutually agree on an outcome that realises the aspirations of both parties for Jerusalem and safeguards its status for people around the world," he said.
Palestinian leaders have only recently agreed to resume indirect contacts with Israel, at Mr Biden's urging.
Palestinian Authority spokesman Nabil Abu Rudeina told AFP news agency: "This is a dangerous decision and will hinder the negotiations.
"We consider the decision to build in East Jerusalem to be a judgment that the American efforts have failed before the negotiations have even begun."
A spokesman for the Israeli interior ministry said: "The Jerusalem District Planning Committee today approved a plan which has been in the works for over three years.
"This is a procedural stage in the framework of a long process that will yet continue for some time. The committee meeting was determined in advance and there is no connection to US Vice President Joe Biden's visit to Israel."
There are still various planning hurdles for the East Jerusalem project to clear, and work is not thought likely to start for at least two years.
Under US pressure, Israel has agreed a 10-month suspension of new building in the West Bank. But the moratorium excludes East Jerusalem, where the Palestinians want their capital.