EU foreign policy chief Catherine Ashton on Friday expressed her "deep regret" over Israel's approval of more new settler homes in east Jerusalem.
The European Union "has repeatedly called on Israel to end all settlement activity, including natural growth, and to dismantle outposts erected since March 2001," Ashton said in a statement.
"Settlement activity threatens the viability of an agreed two-state solution and undermines ongoing efforts to resume negotiations."
Israeli Interior Minister Eli Yishai gave final approval Thursday to the construction of 1,600 units in the Ramat Shlomo neighbourhood, prompting a furious response from Palestinian officials.
Signup to our newsletter and follow us on Facebook and Twitter!
"It is with deep regret that, once again, I received information of the publicly stated intention of the Israeli government to continue settlement expansion in East Jerusalem," Ashton said.
The Israeli minister is expected to shortly approve 2,700 additional homes in two other east Jerusalem settlements.
The move comes as the international community struggles to find a way to relaunch peace talks in a bid to head off a Palestinian plan to seek United Nations membership.
The White House on Thursday urged Israel and the Palestinians to avoid actions that jeopardise efforts to restart the stalled talks but spokesman Jay Carney ducked a question on whether the move would make it harder to convince the Palestinians not to seek UN statehood.
"Our position on that has not changed, which is that we urge both sides not to take any action that makes it harder for the two sides to come together and negotiate," he told reporters.