Joe Biden, the US vice-president, has said that Israel's decision to expand settlement activity in occupied East Jerusalem "undermines" the trust needed for peace talks.
The news that Israel planned to build 1,600 new housing units came the same day Biden was in Israel to emphasise the US president's commitment to Israel's security in the face of a possible Iranian nuclear threat.
"It is incumbent on all parties to grow an atmosphere of support for the negotiations and not to complicate," Biden said at a news conference with Mahmoud Abbas, the Palestinian president, on Wednesday, after the two held talks in the West Bank city of Ramallah.
"Yesterday, the decision by the Israeli government to advance planning for new planning units in east Jerusalem undermines that very trust, the trust that we need right now in order to begin, as well as produce profitable negotiations," he said.
Biden was reiterating in front of the Palestinian leader criticism he first levelled on Tuesday after Israel's announcement.
Marwan Bishara, Al Jazeera's senior political analyst, said nothing new came out of the news conference, especially in the light of Tuesday's condemnation of Israel.
"Aside from repeating more of the same familiarities, nothing fruitful was said," Bishara said. "None of this condemnation is going to go anywhere and the Palestinians know that."
Nour Odeh, Al Jazeera's correspondent in Ramallah, said aides of the Palestinian president summed up the "vague press statement as a moment of crisis".
"Palestinians are requiring action on the ground," she said. "What the Palestinians are saying is thank you for the condemnation and now what!
"[They are saying] these plans can only be reversed if the US uses its leverage to push Israel into retracting the plans - and actions."
Challenge to peace
Palestinians told Biden on Wednesday that Israel's plan to build more settlements challenged Washington's efforts to get indirect peace talks underway.
Salam Fayyad, the Palestinian prime minister, said at a meeting with Biden that Israel's action was "damaging for sure" and "definitely undermines confidence in the prospects for peace.
In Jerusalem, an Israeli cabinet minister apologised for what he termed "real embarrassment" caused to Biden by Israel's announcement.
Aides to Binyamin Netanyahu, the Israeli prime minister, said he had been blindsided by the project's announcement by the interior ministry, run by Shas, an ultraorthodox nationalist party that is a key member of his governing coalition.
"Messages have been sent to Biden and the Americans that there was no intention to undermine him," a senior Israeli official said.
"We were genuinely surprised, just as surprised as the Americans."
But Eli Yishai, the Israeli interior minister from the Shas party, described the timing of the announcement as coincidence.
Nevertheless, Bradley Burston, a columnist for Israel's daily Haaretz newspaper told Al Jazeera there was a sense of embarrassment in Israel about the incident.
"The interior ministry rather uncharacteristically apologised for any hurt felt as a result of the announcement," he said.
"You can bet that this was not the product of anything decided round the cabinet table. It shows to what extent Netanyahu can really control the policies on the ground, settlement freeze versus continued settlement growth.
"If it was not intentional [to keep from Netanyahu the decision to announce the new settlement plan] it suggests what we have here is a rudderless ship rather than a coherent Israeli policy with regards to settlements and the peace process."
However, Netanyahu took no steps to reverse the decision.
In November Netanyahu ordered a 10-month halt to new housing starts in West Bank settlements but exempted those Israel considers part of Jerusalem and projects for Jewish homes in the eastern sector of the city occupied in 1967.
The Palestinians, who had called for a settlement freeze as a condition for resuming talks suspended since December 2008, agreed this week to indirect negotiations with Israel under US mediation, but no date, venue or agenda has been set.
Israel considers all of Jerusalem its indivisible and eternal capital. Palestinians want East Jerusalem as the capital of a state they hope to establish in the West Bank and Gaza Strip