The US has urged Israel to honour its commitment to end West Bank settlement building, after Israel approved plans for the construction of 600 new homes.
Israel is committed to a complete settlement freeze
The plans mark the expansion of what is already the largest Jewish settlement in the Palestinian territories.
The US State Department said Israel was aware of the US view, and the two sides would discuss the issue.
Correspondents say the plan appears to contradict the international Middle East peace plan, known as the roadmap.
Under the roadmap, Israel would freeze all settlement activity while the Palestinians are obliged to crack down on militant attacks against Israel.
"Israel has made a commitment," US State Department spokesman Adam Ereli said. "We look forward to Israel abiding by that commitment and sticking by the roadmap."
Israeli Prime Minister Ariel Sharon and Defence Minister Shaul Mofaz agreed the building plan two months ago but it has only now been made public.
The new homes are to be built at Maale Adoumim, close to Jerusalem. The desert hill-top camp is already home to 28,000 Jewish settlers.
400,000 settlers in the West Bank (including East Jerusalem) and Gaza
130 settlements authorised by Israeli governments
About 100 unauthorised settlements, 60 built during Ariel Sharon's government
Israel spends about $500m on settlements annually - excluding security
Sources: Peace Now and Haaretz newspaper
"This is in total defiance of the roadmap... and total defiance of President Bush's vision. Settlements and peace do not go together," said Palestinian Negotiations Minister Saeb Erekat.
The BBC's James Reynolds in Jerusalem says Israel wants its Maale Adoumim settlement to be joined to Jerusalem, believing that would almost guarantee that it would never have to give it up.
Israel believes it has support from US President George W Bush to keep its major settlement blocks in the West Bank - and so feels it might as well build on them, our correspondent says.
In April, during Mr Sharon's visit to Washington, President Bush said it was "unrealistic" to expect a complete Israeli withdrawal from the West Bank, and backed Mr Sharon's plan to pull out of Gaza next year.
Israel is planning to pull all its 7,000 settlers from Gaza and the troops that protect them as part of a disengagement plan. Israel will maintain control of Gaza's borders, coastline and airspace.
Four West Bank settlements are also to be evacuated.
All settlements in the West Bank and Gaza are considered illegal under international law.