Israel has decided to expand the settlement of Gilo in East Jerusalem with more than 1,100 new homes to be built on occupied territory.
The move comes as the Palestinian Authority takes its bid of statehood to the UN Security Council.
Israel's plan has been met with international condemnation, though the US, who has promised to veto any move towards international recognition of Palestine, has been more measured in its criticism of the new plan.
Hillary Clinton, the US secretary of state, said the move was counterproductive to restarting talks in the region.
Al Jazeera's Patty Culhane reports from Washington.