Israel's current pullout from the Gaza Strip - which is slated to be completed by mid-September - has raised hopes among Palestinians that further land concessions will follow.
Prime Minister Ariel Sharon has said Israel will evacuate some West Bank settlements in a final peace deal, but has insisted that the largest settlement blocs will remain in Israeli hands.
The United States has repeatedly stated its opposition to settlement construction, which violates an international peace plan known as the "road map." The plan outlines the establishment of a Palestinian state.
Israel's determination to hold onto the settlement of Maaleh Adumim is understood by the US "without a trace of doubt," Olmert told Israel Radio on Thursday.
Israel will build homes between the settlement and Jerusalem to connect the two but has put off the construction until "the appropriate time," Olmert said.
"The Americans know this. Everyone understands this. There is no chance that we
will give up on this"
Israeli Vice Premier
Israeli media has said that the government has frozen the construction of the 3650 housing units due to US pressure.
The building is meant to solidify Israel's hold on the area, which is illegal under international law.
"I can tell you that Maaleh Adumim is an inseparable part of Jerusalem," Olmert told the radio. "The Americans know this. Everyone understands this. There is no chance that we
will give up on this."
Israel captured the Gaza Strip, West Bank and east Jerusalem in the 1967 Middle East war. The Palestinians hope to establish a state in the territories with east Jerusalem as its capital.