US Secretary of State Condoleezza Rice said today Israel must stop expanding Jewish settlements but added peace talks were on track despite an Israeli announcement of a new housing project.
"We continue to state America's position that settlement activity should stop, that its expansion should stop - that it is indeed not consistent with 'road map' obligations," Ms Rice said after the Jerusalem municipality announced the housing project.
The US-backed road map, at the heart of the first Israeli-Palestinian peace talks in seven years, requires Israel to halt all settlement activity in the West Bank and obliges Palestinians to rein in militants.
Despite US concern settlement building could derail peace efforts, Israel's Jerusalem municipality unveiled a plan to build 600 houses in Pisgat Zeev, a settlement in an area of the occupied West Bank that Israel considers part of the city.
Israel widened Jerusalem's boundaries after capturing the eastern part of the holy city in a 1967 war. Israel considers all of Jerusalem its capital. Palestinians want East Jerusalem as the capital of a future state in the West Bank and Gaza.
Casting a pall over US-sponsored peace talks, Israel has announced in recent months plans to build hundreds of houses for Jews in and around Arab East Jerusalem.
Asked about the Pisgat Zeev plan, a senior aide to Palestinian President Mahmoud Abbas, said: "This action is condemned. Israel is deliberately placing obstacles in Rice's path."
At a news conference in Amman with Mr Abbas as she wrapped up three days of talks in the Jordanian capital and in Jerusalem, Ms Rice said she was very impressed by the work Palestinian and Israeli negotiators have done so far. "I think it's all moving in the right direction," she said.
An Israeli-Palestinian agreement before US President George W. Bush leaves office in January "is a goal that we can reach," she said.