The Israeli government has given final approval for the construction of 1200 new houses in Jewish settlements on Palestinian land.
Palestinian negotiators said the approval cast doubt on Israel's sincerity in the peace process.
Housing minister Uri Ariel said no country in the world would take orders on where it could build its homes.
The issue of building settlements in occupied Palestinian areas halted the last direct talks in September 2010.
About 500,000 Jews live in more than 100 settlements built since 1967. The BBC reports the settlements are considered illegal under international law, although Israel disputes this.
On Sunday, Mr Ariel confirmed that 793 apartments would be built in east Jerusalem and 394 in several large West Bank settlements.
A senior Palestinian politician, Hanan Ashrawi, said the announcement was a deliberate attempt to scupper peace talks, which are scheduled to start in Jerusalem on Wednesday.
The announcement of the construction may be intended as a sop to supporters of the government who were angered by the forthcoming release of 104 Palestinian prisoners, the BBC reports.
The first 26 prisoners are set to be freed on Tuesday. A list chosen by a ministerial committee was published on Sunday.
Fourteen will be returned to the Gaza Strip and 12 to the West Bank. Eight were due to be released in the next three years, two of them in the next six months.
However, last-minute legal challenges can be lodged with the Supreme Court against their release.