Israel has given the go ahead for the construction of 900 housing units in occupied East Jerusalem, rebuffing a reported US request that it block construction at the Gilo settlement, officials have said. Israeli officials had earlier on Tuesday declined to comment on a report in the Yedioth Ahronoth newspaper that said George Mitchell , the US envoy to the Middle East, had asked an aide to Binyamin Netanyahu, the Israeli prime minister, to halt the process.
Gilo sits on land captured by Israel in the 1967 Middle East war and annexed to its Jerusalem municipality.
Under international law, all Israeli settlements built on occupied land are illegal.
A spokesman for Nir Barkat, the Israeli mayor of Jerusalem, issued a statement saying the mayor "strongly objects to the American demand to halt construction in Jerusalem".
But Mark Regev, the Israeli government spokesman, declined comment on the report, which also said Netanyahu's negotiator had rejected Mitchell's request at a meeting in London on Monday.
Washington 'dismayed'
Relations between the US and Israel have been soured by Washington's repeated calls for a freeze on settlement expansion, a move Israel has so far refused.
The US said it was "dismayed" over the approval to expand the Gilo settlement and sharply criticised the ongoing evictions and demolition of Palestinian homes.
Robert Gibbs, the White House press secretary, said in a statement: "At a time when we're working to relaunch negotiations, these actions make it more difficult for our efforts to succeed."Regev repeated Israel's refusal to include areas it annexed to Jerusalem as part of any accommodation of calls by Barack Obama, the US president, for "restraint" in West Bank settlement growth."Prime Minister Netanyahu, in order to get the peace process back on track, is willing to adopt the policy of the greatest possible restraint concerning growth in the West Bank - but this applies to the West Bank," Regev said.
"Jerusalem is Israel's capital and will remain as such," he said, stating an Israeli position not recognised by world powers and contested by Palestinians who want to establish a state with East Jerusalem as its capital.
Al Jazeera's Jacky Rowland in Jerusalem said: "What we are seeing is Israel's strategy of trying to differentiate between East Jerusalem and the rest of the occupied West Bank.
"We have seen the government repeatedly claim that Jerusalem is its so-called united capital and the government said just today that whereas it planned to exercise what it called maximum restraint in the West Bank, it claimed that Jerusalem was a different case."
The plan for the housing units was cleared at a local level in April and passed by a committee of the interior ministry on Tuesday, Rowland said.
"It [Gilo] is one of these Jewish settlements across the green line in occupied Palestinian land which is attached to Jerusalem basically as a way of Israel trying to strengthen its grip on the capital, and literally create 900 more facts on the ground," she said.
'Two-state solution'
Israel rejects the international description of Gilo as a settlement and says it is a neighbourhood of Jerusalem.
Tel Aviv's refusal to halt settlement construction in the Occupied Territories has stalled any hopes of resuming peace talks between the Palestinians and Israelis.
Al Jazeera's Nour Odeh, reporting from the West Bank city of Ramallah, said the announcement would be "very disappointing" for the Palestinians, who have set a complete freeze on settlement expansion as a precondition for resuming peace talks.
"This announcement in many ways validates the Palestinian argument that you have an Israel government that is not committed to the two-state solution; that does not even recognise that East Jerusalem is occupied land," Odeh said.
The Palestinians swiftly condemned the approval of the housing units, saying Israel is "not interested in peace".
Nabil Abu Rudeineh, the spokesperson of the Palestinian president, told Al Jazeera: "We condemn this step as it sends a clear message that Israel is not interested in peace and that it wants to ensure the failure of international efforts to reach peace and protect the two-state solution.
"Israel wants, through its actions, to secure the invalidity of establishing an independent Palestinian state. The international community's continued acceptance of these Israeli measures threatens stability in the region and the foundations of peace we seek."
The West Bank-based Palestinian Authority has expressed frustration at Israel's refusal to concede in order to get peace talks back on track and on Sunday said they would take steps to get the UN to back their right to an independent state.
While calling on Israel to show restraint in settlement expansion as a gesture of goodwill, the US has also urged Mahmoud Abbas, the Palestinian president, to drop his demand for a total freeze.
Netanyahu has offered a temporary restriction on projects that have not already started in the West Bank, but Abbas says this is insufficient and that it does not include areas Israel annexed to Jerusalem.
The Gilo settlement
The Israeli Interior Ministry has announced today that 900 new housing units are slated to be built by Israeli officials at the Gilo settlement located in East Jerusalem.  

A press release by the Interior Ministry read, "The planning and construction committee has authorised the construction of 900 housing units in the Gilo neighbourhood in Jerusalem."   
Annexed after the 1967 war, East Jerusalem is what Palestinians still hope to make the capital of their future state.  However, the current Israeli government has made claim to Jerusalem as the capital of Israel.  "Jerusalem is Israel's capital and will remain as such," said government spokesman Mark Regev.

Earlier this month the Palestinian Authority insisted that all negotiations with Israel would be put permanently on hold until settlement expansion and home demolitions were halted.  The UN reports that 1,500 home demolition orders in East Jerusalem are currently pending in Israeli courts. At least 600 Palestinians have been displaced from their homes in East Jerusalem since the beginning of this year.  Nearly 500,000 Israelis live in more than 100 different settlements located in Jerusalem and the West Bank.   

U.S envoy to the Middle East, George Mitchell, asked President Benjamin Netanyahu to cancel settlement expansion plans, however his request went unheeded.  Settlement expansion has soured relations between the U.S and Israel, however Israel is still the largest recipient of U.S aid annually.  Responding to requests by the U.S government that settlement expansion be halted Jerusalem Mayor Nir Barkat said that he, "strongly objects to the American demand to halt construction in Jerusalem and will allow construction for Jews, Muslims, and Christians in any part of Jerusalem without prejudice.  The demand to halt construction by religion is not legal in the United States or in any other free place in the world."

Under international law building settlements in occupied territory is illegal.  The UN has deemed Israeli settlements to be a violation of the Geneva Convention.