The American Secretary of State, Hillary Clinton, has sharply criticised Israel's decision to build new settlements in occupied east Jerusalem.
In the course of a 43-minute telephone call, the State Department says, Mrs Clinton told Israeli prime minister Benjamin Netanyahu that the move is deeply negative for United States-Israeli relations and undermines trust in the peace process.
The BBC's Washington correspondent describes this as a rare and sharp rebuke from Washington.
Israel's announcement overshadowed a visit by US Vice-President Joe Biden aimed at restarting peace talks. The State Department says Mrs Clinton called Mr Netanyahu to "make clear that the United States considered the announcement to be a deeply negative signal about Israel's approach to the bilateral relationship and contrary to the spirit of the Vice-President's trip".
The Palestinians have indicated they will not return to the negotiating table unless the Israeli decision is revoked.
Netanyahu regrets timing of announcement
The Quartet of Middle East peace mediators - the US, Russia, the EU and the UN - also condemned the announcement and said it would review the situation at its ministerial meeting scheduled for 19 March in Moscow.
Mr Netanyahu earlier apologised for the timing of the settlement announcement, which was made as Mr Biden was holding a day of talks in Jerusalem. He said he had summoned interior minister Eli Yishai to reprimand him.
Close to 500,000 Jews live in more than 100 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. They are illegal under international law, although Israel disputes this.
The latest announcement by the Jerusalem municipality approves 1600 new housing units in the East Jerusalem settlement of Ramat Shlomo.