Israeli Prime Minister Benjamin Netanyahu late Tuesday cancelled plans to build 20,000 new settler homes in the West Bank, hours after their announcement sparked US and Palestinian criticism.
Netanyahu ordered Israeli Housing Minister Uri Ariel "to reconsider all of the steps for evaluating planning potential (for the settler homes) that he distributed without any advance coordination," a statement from Netanyahu's office said.
Netanyahu told Ariel the plan was "meaningless" legally -- "and an action that creates an unnecessary confrontation with the international community at a time when we are making an effort to persuade elements in the international community to reach a better deal with Iran," according to the statement.
Ariel was said to "accede" to Netanyahu's "request".
Intelligence Minister Yuval Steinitz on Wednesday urged "coordinated" settlement building.
"The prime minister is right when he says that at such a sensitive time, while we're trying to persuade the Americans, Europeans and Russians to amend a problematic deal with Iran, things must be coordinated with the prime minister," Steinitz told Israeli public radio.
The prime minister's order came after Palestinian president Mahmud Abbas warned the construction plans, announced earlier Tuesday by Ariel's ministry, would prompt him to declare the peace process over if they went ahead.
Washington expressed "deep concern" at the move, which threatened to add sharply to the 550,000 Israeli settlers already living in the occupied West Bank, including annexed Arab east Jerusalem.
Netanyahu made it clear the housing ministry's call for tenders for the homes threatened to distract from his efforts to convince world powers to not sign a deal with Iran, over its nuclear programme, he considered inadequate.
"At this time, the attention of the international community must not be diverted from the main effort -- preventing Iran from receiving an agreement that will allow it to continue its military nuclear program," Netanyahu said, according to the statement.
Iran and the world powers it is negotiating with over its nuclear programme came close last weekend to agreeing a preliminary accord opening the way to a more comprehensive pact.
But differences prevented a breakthrough, and the two sides are scheduled to meet again in Geneva on November 20.
Netanyahu has furiously denounced the agreement being worked on as "dangerous" claiming it is entirely in Iran's favour and does nothing to halt a nuclear programme he and the world powers fear is aimed at developing atomic weapons.
Signup to our newsletter and follow us on Facebook and Twitter!
He has said Israel will not shy from military action on Iran if necessary to prevent any nuclear threat directed at it.
Faltering peace process
US Secretary of State John Kerry, who rushed to Geneva last weekend to lead the US negotiations with Iran, was in Israel and the Palestinian territories last week in a bid to rescue the peace talks there already faltering after just three months of meetings.
State Department spokeswoman Jennifer Psaki had said Washington was not only concerned by the initial announcement of the 20,000 settler homes, but also "surprised" and sought an explanation from Israel.
She repeated the longstanding US position on settlements -- reaffirmed by Kerry last week -- that "we do not accept the legitimacy of continued settlement activity."
Psaki said the United States had "called on both sides to take steps to create a positive atmosphere for the negotiations," which, with Kerry's mediation, were relaunched in July after a three-year hiatus.
Israel's newly reappointed Foreign Minister Avigdor Lieberman pledged earlier on Tuesday to work to mend relations with the US.
"Regarding our recent differences with the United States, it's now time to calm things down," Lieberman he said.
Settlement construction brought the last round of talks in 2010 to a halt just weeks after they had begun.
Several Israeli officials have claimed the settlement announcements have been in keeping with tacit "understandings" between the two sides linked to the release of 52 veteran Palestinian prisoners since August.
But the Palestinians deny any such agreement exists, a position backed by Kerry last week.
The US top diplomat warned Israel on Thursday that it needed to choose between settlement building and peace, adding that failure to strike an agreement could trigger a new Palestinian uprising.
"The alternative to getting back to the talks is the potential of chaos," Kerry said, warning of a "third intifada."