The Palestinians accused Israel of wrecking US President George Bush's two-state vision for the Middle East after deputy defence minister Zeev Boim on Monday said 3000 housing units would be built in the northern settlement of Ariel.
"The government's decision to build 3000 additional housing units in Ariel is an expression of our desire to strengthen the settlement blocs," Boim said in comments carried by Israeli radio.
But Sharon's office issued a statement denying that any such plans, which would be in direct contravention of the internationally-drafted "roadmap" peace plan, were on the table.
"The prime minister's office and Defence Ministry have no knowledge whatsoever of authorisation to construct or build 3000 new housing units in Ariel," an official in Sharon's office told AFP in a statement.
Sharon's office denied there was
a plan to build 3000 homes
The official said only that plans had previously been approved for little more than 100 new homes in Ariel, about 20km inside the Palestinian territory.
"What was authorised and approved in Ariel was the marketing of 117 dwelling units only within the city of Ariel," he said.
Sharon under fire
Sharon, under fire from his traditional right-wing supporters for pulling settlers out of the Gaza Strip, has said that he planned to "continue and develop" Israel's settlement programme in the West Bank and keep hold of the largest settlements such as Ariel.
But he has been rebuked on a number of occasions by Washington after announcing plans to expand other West Bank settlements.
"Israel is presenting 3000 reasons why it is undermining the peace process"
Palestinian chief negotiator
A new row over settlements so close to his trip next week to New York where he is to attend the annual UN General Assembly could have taken much of the gloss off what the prime minister hopes will be a chance to milk plaudits over his historic evacuation from Gaza and a corner of the West Bank.
Ariel is arguably the most controversial of all Israel's West Bank settlements as it is so far within the territory that it should form the bulk of the Palestinians' promised future state.
The Palestinians reacted furiously to Boim's declaration, saying it wrecked Bush's two-state vision for the Middle East as laid down in the roadmap.
"Israel is presenting 3000 reasons why it is undermining the peace process," chief negotiator Saeb Erikat told AFP. "This will destroy the possibility of a Palestinian state and the two-state solution."
The roadmap was launched more than two years ago but has made little progress since, with the Israelis and Palestinians each accusing the other of violating its terms.
Palestinian officials toured
evacuated settlements in Gaza
Boim's announcement on the plans for Ariel undermined some of the optimism engendered by signs that a deal was close at hand in a dispute over the future access of civilians and goods in and out of Gaza after Israel's departure.
The day after Palestinian President Mahmoud Abbas expressed hope that a deal on one of the most contentious of the issues dividing the two sides would be resolved "very soon", a close aide to Sharon also said a compromise was in sight.
The official said Israel would insist on carrying out checks on merchandise coming into Gaza from Egypt but indicated a willingness to allow civilians to cross with checks by the Palestinian authorities provided they were credible.