The United States denounced Israeli plans for new settlements in east Jerusalem and the West Bank in the wake of a historic UN vote to upgrade Palestine's diplomatic status, calling them a setback to peace.
On Thursday, the United Nations General Assembly overwhelmingly backed a resolution recognising Palestine within the 1967 borders as a non-member observer state.
Israel lashed out in response, with an official on Friday confirming to AFP plans to build the 3,000 settler homes, without specifying exactly where they were to be located.
"In light of today's announcement, let me reiterate that this administration -- like previous administrations -- has been very clear with Israel that these activities set back the cause of a negotiated peace," Secretary of State Hillary Clinton said.
"The most lasting solution to the stalemate in Gaza would be a comprehensive peace between Israel and all Palestinians, led by their legitimate representative, the Palestinian Authority," she added in an evening speech to an audience in Washington that included Israeli Foreign Minister Avigdor Lieberman and Defense Minister Ehud Barak.
Like Israel, President Barack Obama's administration tried to stop the Palestinian push for recognition, saying it would place another obstacle in the path to peace and that statehood could only come through negotiations with Israel.
"This week's vote should give all of us pause. All sides need to consider carefully the path ahead," Clinton said.
"We all need to work together to find a path forward in negotiations that can deliver on the goal of a two-state solution. That remains our goal.
"If and when the parties are ready to enter into direct negotiations to solve the conflict, President (Barack) Obama will be a full partner to them."
Clinton's remarks came on the heels of a response from the White House earlier in the day.
"We reiterate our longstanding opposition to settlements and east Jerusalem construction and announcements. We believe these actions are counterproductive and make it harder to resume direct negotiations or achieve a two-state solution," said National Security Council spokesman Tommy Vietor.
Palestinian leader Mahmud Abbas meanwhile called for a return to peace talks, but also chided Israel's latest settlement plans.
"I've said a thousand times that we want to resume negotiations and we are ready to do it," Abbas told reporters in New York.
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"We are not setting any condition but there are at least 15 UN resolutions which consider settlement activity as illegal and an obstacle to peace which must be removed," he said. "Why do (the Israelis) not stop settlement?"
Palestine Liberation Organisation official Hanan Ashrawi told AFP "it is an act of Israeli aggression against a state, and the world needs to take up its responsibilities."
Israeli Prime Minister Benjamin Netanyahu had warned that by going to the UN, the Palestinians had "violated" previous agreements with Israel, such as the 1993 Oslo Accords, and that his country would "act accordingly."
Such talks have been on hold since September 2010, with the Palestinians insisting on a settlement freeze before returning to the negotiating table and the Israelis insisting on no preconditions.
Israel has long feared that if the Palestinians won the rank of a UN non-member state, they could pursue the Jewish state for war crimes at the International Criminal Court -- particularly over settlements.
With their newly acquired status, the Palestinians now have access to a range of UN agencies, as well as to the ICC, but Abbas said he had no plans to immediately petition the tribunal.
"We now have the right to appeal the ICC, but we are not going to do it now and will not do it except in the case of Israeli aggression," he said.
Israeli media reports said that some new settlement construction would be in a highly contentious area of the West Bank known as E1, a corridor that runs between the easternmost edge of annexed east Jerusalem and the Maaleh Adumim settlement.
Palestinians bitterly oppose the E1 project, as it effectively cuts the occupied West Bank in two, north to south, and makes the creation of a viable Palestinian state highly problematic.
The Palestinians want east Jerusalem as capital of their state and vigorously oppose expansion plans for Maaleh Adumim, which lies five kilometres (three miles) from the city's eastern edge.
Linking the settlement and the city is an idea espoused by hardliners within Netanyahu's rightwing Likud party but strongly opposed by Washington.
Arab east Jerusalem was captured by Israel with the rest of the West Bank in the 1967 Six Day War and later annexed in a move not recognised by the international community.
Israel considers all of Jerusalem as its "eternal, indivisible" capital, and does not view construction in the eastern sector to be settlement activity.