Biggest offensive since Hamas takeover comes a day before Israeli-Palestinian talks.
Settlement expansion in Har Homa, known to the Palestinians as Abu Ghneim, just north of Bethlehem, in 1997 led to a collapse in peace talks at that time.
Previously, some Palestinian officials called for a boycott of the meeting after Israel issued a tender for about 300 new homes near Jerusalem on land it annexed – a move not internationally recognised – during the 1967 Middle East war.
Saeb Erekat, the chief Palestinian negotiator, said his delegation “introduced the issue of Har Homa and expressed our outrage”.
He said: “If you want to restore the credibility of the peace process, the Israeli government must revoke this order.”
Erekat said the Israelis raised concerns about security issues, including ongoing rocket attacks from the Gaza Strip.
“You need a state before you can have a chance at democracy and permanent peace”
The incident on Monday was Israel’s largest incursion into the Gaza Strip since Hamas seized control of the territory in June.
He said: “We are operating in Gaza on a daily basis. Yesterday we returned from a broad operation … this brings a reduction in the ground threat and the firing of rockets but does not stop it.”
“We will come to the point where we will have to carry out the big operation.”