The office of Ehud Olmert, Israel's prime minister, was also quick to play down the planned settlement expansion.
"There has been no decision taken, and there is nothing new," Mark Regev, Olmert's spokesman, said.
Two weeks ago, Israel invited bids for more than 300 new housing units in another settlement at Jebel Abu Ghneim in occupied and annexed east Jerusalem. Har Homa, as the settlement is known to Israelis, is built on land confiscated by Israel.
"The housing ministry must provide a solution to the housing shortage in Jerusalem," Boim said.
The expansion came a week after Israelis and Palestinians attempted to revive peace talks at a conference in the US city of Annapolis.
At the conference, both Israel and Palestinians pledged to abide by the 2003 international roadmap peace blueprint.
The first phase calls on Israel to halt settlement activity and on Palestinians to improve security.
Palestinian officials have said the expansion plans compromise the renewed peace talks.
Saeb Erekat, the chief Palestinian negotiator, called on the international community to pressure Israel to halt settlement expansion.
"Israel has to choose between continued settlements expansion and a commitment to peace," he told Al Jazeera.
"It cannot continue to talk peace while continuing to unilaterally change facts on the ground."
Haim Ramon, Israel's deputy premier, also spoke out against Boim's initiative.
He said it "doesn't help the negotiations and especially our international standing and our international support, especially from the US, that we are striving for at the start of negotiations".
Shirin Abu Aqla, Al Jazeera's correspondent, said the new settlement will further isolate East Jerusalem from the rest of the West Bank.
She said: "This [area] was supposed to be part of a future Palestinian state. But now it will be land annexed to Israel."
Palestinians want the eastern part of Jerusalem, which Israel captured from Jordan in 1967 and later annexed, for the capital of a future state.
While denying that his plan was not motivated by a desire to cement Israeli control over parts of the city, Boim said he believed that Israel should not give up sovereignty over Atarot or any part of east Jerusalem.
"My opinion is that our sovereignty over Jerusalem can't be divided," he told Army Radio.
In its 40 years of control over east Jerusalem, Israel has built new neighbourhoods there that are now home to 180,000 Israelis.
The international community has never recognised Israel's control, saying that the city's future should be decided in negotiations between the two sides.