The new settlement construction was announced on Wednesday just hours after suspected Jewish extremists torched a West Bank mosque, in another development likely to inflame tempers in an already heated atmosphere.
Months of unrest have escalated in recent days, spreading from annexed east Jerusalem to the West Bank and Arab communities across Israel, raising fears of a new Palestinian uprising.
Kerry was due to hold talks with Palestinian president Mahmud Abbas in Amman on Thursday, after arriving in Jordan late Wednesday to discuss the situation in annexed east Jerusalem and other regional issues at a private dinner with King Abdullah II.
So far no meeting between Kerry and Israeli Prime Minister Benjamin Netanyahu has been scheduled, the US State Department said.
Kerry's arrival in the region comes as Israel struggles to contain the wave of unrest.
Much of the tension has been focused on Jerusalem's flashpoint Al-Aqsa mosque compound, a site holy to both Muslims and Jews, which has seen numerous clashes sparked by Palestinian fears that Israel is preparing to legislate changes to allow Jewish prayer there.
'Israeli violations cannot be tolerated'
"The Palestinian position will be made crystal clear: the Israeli violations are a red line and cannot be tolerated -- especially with the tension and Israeli escalation in Al-Aqsa and Jerusalem," Abbas spokesman Abu Rudeina said.
Clashes at the mosque compound have drawn sharp criticism from both the Palestinians and Jordan, which has custodial rights at the shrine. Israel has repeatedly pledged it has no plans to alter the decades-old status quo.
Abbas will also tell Kerry that the Palestinians will not be deterred from plans to present a draft resolution to the UN Security Council this month seeking an end date for Israeli occupation, Rudeina said.
Kerry had also been scheduled to go to the United Arab Emirates, but that visit has been cancelled, State Department spokeswoman Jen Psaki said without elaborating.
Ahead of Kerry's arrival, King Abdullah took Israel to task by expressing his "total rejection" of its "repeated aggressions and provocations in Jerusalem," a palace statement said.
Meanwhile an Israeli committee approved plans to build 200 homes in Ramot, a neighbourhood of annexed east Jerusalem, despite recent settlement announcements sparking outrage among the Palestinians.
'Hostile and provocative acts'
The US State Department sharply condemned the plans.
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"We are deeply concerned by this decision, particularly given the tense situation in Jerusalem," said Psaki.
Middle East Quartet envoy Tony Blair urged Israeli and Palestinian leaders to call for restraint and "an end to hostile and provocative acts", including settlement construction.
UN chief Ban Ki-moon demanded both sides do everything possible "to avoid further exacerbating an already tense environment".
Tit-for-tat violence showed no signs of easing, with a pre-dawn arson attack on a mosque in a village between Ramallah and Nablus in the West Bank, which Palestinian security officials blamed on extremist Jewish settlers.
"By the time the civil defence (firefighters) got there, the ground floor was completely burnt out," village council head Faraj Nassan told AFP.
It was the second time in two years that a mosque in the village had been set alight.
The attack came two days after Palestinian knife attacks killed a settler in the southern West Bank and an Israeli soldier in Tel Aviv.
Elsewhere a Molotov cocktail was thrown at an ancient synagogue in the Arab Israeli town of Shfaram, causing minor damage, police said. The structure is not currently used for worship.
'Real test of leadership'
Palestinian anger is also running high after Israeli troops shot dead a 22-year-old protester in the southern West Bank on Tuesday.
Since the current round of violence began five months ago with the kidnapping and murder of three Israeli teenagers by militants, at least 17 Palestinians have been killed in the West Bank, according to an AFP count.
Israeli Finance Minister Yair Lapid said the situation was "a real test of leadership" for both Abbas and Netanyahu.
"We must throw a bucket of cold water over the explosive situation... of the last few weeks, and not add fuel to the furnace," he said.
Defence Minister Moshe Yaalon said it was too early to describe the wave of violence as a new Palestinian uprising, but warned the public to be alert for a possible further escalation.
Meanwhile, Israel said it will not cooperate with a UN inquiry into its 50-day war with rocket-firing militants in Gaza this summer, because of the enquiry commission's "obsessive hostility against Israel."
In August, Canadian lawyer William Schabas was named as the head of the UN commission, angering Israel, where he is widely regarded as hostile to the Jewish state over reported calls to bring Netanyahu before the International Criminal Court.