The plan was met with a chorus of Western criticism. Britain and the European Union called on Israel to reverse the decision, and US Secretary of State Hillary Clinton said new settlement building would be "counter-productive" to the efforts to revive peace talks.

Palestinian President Mahmoud Abbas applied at the UN on September 23 for full Palestinian membership, a move opposed by Israel and the US, which urged him to resume negotiations.

Abbas has made a cessation of Israeli settlement building a condition for returning to talks which collapsed a year ago after Israeli Prime Minister Benjamin Netanyahu refused to extend a 10-month partial moratorium on construction.

The so-called Quartet of international mediators, the US, the EU, Russia and the UN, has called for talks to begin within a month and urged both sides not to take unilateral actions that could block peacemaking.

Saeb Erekat, the chief Palestinian negotiator, said the new housing units Israel wants to build represented "1,100 'noes' to the Quartet statement" urging a resumption of negotiations.

The new homes are to be built in Gilo, an urban settlement that Israel erected on land it captured in the West Bank in a 1967 war and annexed unilaterally as part of its declared capital, Jerusalem.

Palestinians want to create a state in the occupied West Bank and the Gaza Strip, with East Jerusalem as its capital, and say settlements could deny them a viable country. Israel cites historical and Biblical links to the West Bank, which it calls Judea and Samaria.