US Secretary of State Colin Powell has stepped up criticism of the separation barrier Israel is building in the West Bank.
Israel says the fence is to stop attacks from the West Bank
In an interview with the Washington Post newspaper Mr Powell said that by "intruding" into Palestinian land, the barrier was increasingly pre-judging future negotiations about the borders of a Palestinian state.
His words follow a decision by the Israeli cabinet to approve the next phase of the controversial fence.
On Friday, Israel imposed a total closure of the West Bank and Gaza Strip for the Jewish holiday of Yom Kippur - the day of atonement - which runs for 24 hours from Sunday evening.
The Israeli military says the customary closure of the Palestinian territories was justified in view of the heightened risk of attacks by militants.
Gaps left by Israel in the barrier did not satisfy Mr Powell; the question, he said, was what became of the gaps in due course.
He indicated the route should stick to the "green line" - the frontier between Israel and the West Bank before the 1967 war.
"The more you intrude in Palestinian areas and the more it looks like it could be contiguous intrusion around large sections of Palestinian land that would prejudge subsequent negotiations as to what a Palestinian state may look like, that's a problem," Mr Powell said.
The secretary of state there were "intense discussions" in Washington about how to respond to the problem.
Among the options under consideration, officials say, is deducting the cost of building the barrier from the billions of dollars which America gives Israel in the form of loan guarantees.
Meanwhile, the Palestinian delegate at the UN says he will ask Arab states to back a draft resolution demanding Israel reverse its decision to extend the barrier deeper into Palestinian territory.
The draft resolution would make the point that the planned security barrier "is illegal and should be stopped," Nasser al-Kidwa was quoted as saying by Reuters.
Earlier in the week, a UN report condemned the barrier as illegal and tantamount to "an unlawful act of annexation".
The next section of the Israeli fence, which will be 45 kilometres (28 miles) long, is being built further east and will extend deeper in the West Bank than other sections so far completed.
The most contested issue in planning the next segment was whether the barrier would incorporate Ariel - the West Bank's second-largest Jewish settlement with a population of 18,000.
"Certainly it has to pass east of Ariel, but in a manner which will not antagonise the population of the territories and which will be in coordination with the agreements we have with the US Government," Deputy Prime Minister Ehud Olmert said.