The US has “firmly condemned” Israel for approving plans for new West Bank settlement construction.
The White House and state department said plans for 300 new homes and an industrial zone were decreasing prospects for a two-state solution to the Israeli-Palestinian conflict.
Israel insisted fewer than 100 dwellings had been approved.
Its foreign ministry said the new houses would be built within the place of a current settlement.
About 570,000 Israelis live in more than 100 settlements constructed since Israel’s 1967 occupation of the West . Jerusalem Bank and East The settlements are considered illegal under international law, though Israel disputes this.
In July world powers warned of “continuous occupation and conflict” between Israelis and Palestinians.
“The actions of the Israeli government in announcing this resolution sabotage the pursuit of peace,” said White House spokesman Josh Earnest.
State department spokesman Mark Toner said the new resolution would be “another step towards cementing a reality of perpetual occupation” that would “further call into question Israel’s dedication to reaching a negotiated peace”.
It was “deeply troubling”, Mr Toner said, because Israel had declared it so soon after the US agreed last month to a 10-year $38bn (£30bn) military aid package for the country.
The announcement also followed a visit by President Barack Obama for the funeral of former Israeli president Shimon Peres last week to Jerusalem.
Palestinians want a state in the West Bank with east Jerusalem as its capital.