The Jerusalem Municipal Government approved on Wednesday the building of 20 new apartments for Jews in East Jerusalem.
The news came as Israeli Prime Minister Benjamin Netanyahu held talks with U.S. President Barack Obama in Washington in their first official meeting since a dispute over Israel's housing plans.
The new apartments will be built on the site of an old hotel, the Shepherd, in the Sheikh Jarrah area of East Jerusalem. The final go-ahead for the new building project, funded by American millionaire Irving Moskowitz, was given last week.
In his speech to the American Israel Public Affairs Committee (Aipac) members in Washington on Monday, Netanyahu said "the Jewish people were building Jerusalem 3,000 years ago and the Jewish people are building Jerusalem today."
"Jerusalem is not a settlement. It is our capital," he added.
Saudi Arabia condemned Netanyahu's stance, calling on world leaders to stop Israel's unilateral policies violating all norms of international law.
Israel's decision to build 1,600 new housing units for Jewish families in the disputed territory in East Jerusalem, announced during U.S. Vice President Joseph Biden's visit to Israel, has infuriated the U.S. as it poses a threat to the resumption of U.S.-backed Israeli-Palestinian peace talks.
Israel, which receives $2.4 billion of U.S. foreign aid every year, apologized for the bad timing of its announcement but has rejected the demand by the United States to scrap the new construction plans.
Under the internationally agreed roadmap for Middle East peace, Israel is obliged to freeze all settlement construction activity and remove unauthorized outposts built since 2001 from Palestinian territories.
TEL AVIV, A24 March (RIA Novosti)