On Sunday, Clinton had called the Israeli plans "unprecedented" and said that Washington's demand for a full settlement freeze was not a precondition for talks between Israel and the Palestinian Authority (PA).
A spokesman for Mahmoud Abbas, the Palestinian president, immediately condemned those comments, saying that the US had failed to put enough pressure on Israel to abandon the completion of settlements already under construction or for which permits had been granted.
While Netanyahu's plan would place a freeze on new settlements in the occupied West Bank, no Israeli restrictions would be placed on 3,000 buildings already under construction.
Furthermore, no restrictions will be placed on settlement projects in East Jerusalem, which the Palestinian Authority sees as the capital of a future Palestinian state.
Clinton moved on Tuesday to clarify her remarks on Washington's view of Netanyahu's plan, insisting that progress had been made.
"When this government in Israel came forward and said 'we have already permitted a number of units of housing to go forward and we can't legally undo that - but we will put an end to all new settlement activity, no new permits, no new approvals, no expropriation in the West Bank', I said that was a positive step," she told Al Jazeera.
"It is not what we would want and it is nowhere near enough – but I think that when you keep your eye on what we want to achieve, it is a better place to be than the alternative, which is unrestrained."
Clinton said that while the Obama administration still wants an end to all settlement building activity, Netanyahu's plan went further than any previous Israeli offer.
"I think it is important for your viewers to say to themselves, 'well, we can continue with what we have now – which is a halt to nothing – or we can halt all new settlement activity'," she said.
"It is not everything that the [US] president asked for but it is much closer to anything that anyone has ever achieved in getting an Israeli government to agree."
Israel's settlement building programme is illegal under international law and several United Nations Security Council resolutions have called for it to stop.
But Israel has repeatedly ignored all international calls for it to stop its settlement building.
Ban Ki-moon, the UN secretary-general, urged Israel on Tuesday to end its "provocative actions" in East Jerusalem, while calling for it to freeze all settlement activity in the occupied West Bank.
"The secretary general is dismayed at continued Israeli actions in occupied East Jerusalem, including the demolition of Palestinian homes, the eviction of Palestinian families and the insertion of settlers into Palestinian neighbourhoods," a UN statement said.
"The eviction today of a Palestinian family in East Jerusalem is just the most recent incident," the statement said.