The Israeli government approved on Sunday the construction of some 1,200 homes in the occupied West Bank and east Jerusalem, a move that could threaten the already fragile peace talks scheduled for next week.
Israeli-Palestinian negotiations, scheduled to resume in three days, ended in 2010 over the highly contentious issue of Israeli settlement building, a key issue for Palestinians, who want to establish a state in Gaza, the West Bank and east Jerusalem.
The announcement of new homes was somewhat expected, with American and Palestinian officials giving critical statements earlier in the week. Jen Psaki, a State Department spokeswoman, said in Washington that "we do not accept the legitimacy of continued settlement activity."
Israel's Construction Minister Uri Ariel, who belongs to a staunch pro-settler Jewish party, said in a statement there were no reasons to stop building.
"No country in the world takes orders from other countries where it can build and where it can't," Ariel said. "We will continue to market housing and build in the entire country ... This is the right thing at the present time, for Zionism and for the economy."
However, that's not how Israeli Finance Minister Yair Lapid saw it, saying on Sunday that the decision is "a double mistake."
"Solutions for the problem of housing should be founded in the areas of need," Lapid said. "Additionally, the use of resources meant to provide housing for the middle class to needlessly defy the Americans will impede the peace process."
Palestinian President Mahmound Abbas has said his side would not participate in peace talks unless Israel agreed to cease settlement construction in contended areas, which already houses about 560,000 Israelis. However it appears in recent talks with Secretary of State John Kerry that Abbas has loosened his position on this point.
On its website the Israeli Housing Ministry said 793 new apartments would be built in parts of the West Bank that Israel annexed in the 1967 war, and that 394 more units would be sold in Ariel, Efrat, Maale Adumim and Betar, areas Israel wants to keep if a peace deal is reached.
Hanan Ashrawi, a member of the Palestinian Liberation Organization executive committee, told the BBC she condemned the Israeli announcement.
"We believe that Israel is deliberately sending a message to the United States, to the rest of the world that regardless of any attempt at launching negotiations, 'we are going to press ahead with stealing more land, building more settlements and destroying the two-state-solution'," she said.
"This is an extremely dangerous policy, and if left unchecked it certainly would lead to greater conflict and the destruction of all chances of peace."
Palestinians have not said they would abandon peace talks after the settlement announcement.
Just hours after the housing announcement was made, Israel announced the name of 26 political prisoners it planned to release ahead of peace talks.
The settlement move was thought to be a way to appease far-right parties after the release of Palestinian prisoners, many of whom were serving long sentences for violent crimes.
They are expected to be released Tuesday.
Both the UN and EU believe that settlement construction violates the Fourth Geneva Convention that prohibits an occupying power moving its nationals into occupied territory.