Story Added : 15th March 2010
Updated: 35 minutes ago
The White House says Israel's decision to allow the construction of 1,600 new homes in east Jerusalem is an insult and an affront.
The criticism comes despite Israeli prime minister Benjamin Netanyahu expressing regret that the announcement has strained ties with Washington.
US Secretary of State Hillary Clinton condemned the settlement move in a blunt phone call to Mr Netanyahu.
And the president's chief adviser, David Axelrod, has also given a stern rebuke.
"This was an affront, an insult. For this announcement to come at this time was very destructive," Mr Axelrod said.
The White House is particularly disappointed in the timing of the announcement, coming as vice president Joe Biden was visiting the region.
It says Israel can improve the situation by bringing constructive ideas to revived peace talks.
Meanwhile, Israel has extended a lockdown of the West Bank and restricted access to the Al Aqsa mosque in Jerusalem to quell tensions over the latest settlement plans.
Israel sealed off the West Bank on Friday after the announcement.
The decision has fuelled anger among Palestinians who want to build a future capital in the city's east.
The lockdown was scheduled to end on Saturday night, but the Israeli Government has extended it for two more days for fear of a continued risk of attacks.
In recent weeks the Al Aqsa mosque in Jerusalem's old city has been the scene of repeated violence between Muslim and Jewish worshippers.
Only women or men over 50 are allowed in during the lockdown.
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