Israel has pushed forward with plans to construct 1,500 apartments in an illegal settlement in East Jerusalem, a move that could undermine recently renewed Israeli-Palestinian peace talks.
City spokeswoman Brachie Sprung said on Sunday that city officials had approved plans to lay down infrastructure for the project.
She called the move a "standard and bureaucratic process" and said final government approval was still required. Actual construction is still years away, she said.
The move comes just days after Israelis and Palestinians resumed talks after a five-year stalemate.
Illegal Israeli settlement construction in the Occupied West Bank and East Jerusalem is one of the thornier issues separating the two sides.
The city is pushing development in the settlement of Ramat Shlomo, a project that has also raised tensions with the US.
Israel first announced the plans in 2010 during US Vice President Joe Biden's visit to Israel, sparking a diplomatic rift with Washington that took months to mend.
Israel annexed East Jerusalem following its 1967 war with its Arab neighbours and claims the area as an inseparable part of its territory.
The Palestinians also claim East Jerusalem as the capital of their hoped-for state. About 200,000 Jews and roughly 250,000 Palestinians live in East Jerusalem, which is home to Jewish, Christian and Muslim holy sites.
While Israelis consider East Jerusalem settlements neighbourhoods like others in the city, the international community does not recognise Israel's annexation of the area and rejects the areas settlements there as illegal.
Palestinian official Hanan Ashrawi accused Israel of playing a "dangerous game" by moving ahead with the plans.
"It seems they're pushing ahead with infrastructure as though this is not a basic part of settlement activity!" she wrote in an email.
The office of Israeli Prime Minister Binyamin Netanyahu declined to comment.