The European Union's foreign policy chief has criticised Israel's plan to build hundreds of homes in annexed east Jerusalem and called for it to hold fresh talks with the Palestinians.
Catherine Ashton "deeply regrets" the Israeli interior ministry decision to back the expansion of the Gilo settlement by 797 units, said a statement from her office.
"Settlements are illegal under international law and threaten to make a two-state solution impossible," said the statement, which repeated the EU's call for an end to settlements, both in the West Bank and in east Jerusalem.
Talks "continue to represent the best way forward in resolving the Israeli-Palestinian conflict," it added.
"Continuous expansion of settlements makes this all the more difficult."
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Israel's interior ministry granted final approval for the plans on Thursday.
The move will mean the westward expansion of Gilo, which is on the southern flanks of east Jerusalem, very close to the West Bank town of Bethlehem.
"Israel's decision to build 800 housing units is part of an overall Israeli plan which aims to destroy the two-state solution," negotiator Saeb Erakat told AFP on Thursday.
The only answer was for the international community to back Palestinian plans to seek upgraded UN status, he added.
A resolution to that effect is to be put to the UN General Assembly in November.
Israel considers both west and east Jerusalem to be its "eternal, indivisible" capital, and does not view construction in the eastern sector as settlement activity.
The Palestinians, however, believe east Jerusalem should be the capital of their future state and are fiercely opposed to the extension of Israeli control over the sector.