Israel has announced plans for nearly 700 homes in mainly Arab East Jerusalem - despite Palestinian and international demands that it freeze building there.
The US and EU criticised the move, which follows plans unveiled last month for 900 homes on occupied land in Gilo, south of Jerusalem.
Israel occupied East Jerusalem in 1967 and later annexed it, in a move not recognised internationally.
The Palestinians want to locate their future capital in East Jerusalem.
They said the plans showed Israel was "not ready for peace".