U.S. Secretary of State Hillary Clinton has expressed disappointment that Israeli settlement building had deadlocked Middle East peace talks, but said a "positive outcome" was still possible.
Clinton spoke in Washington on the eve of talks with Israeli Prime Minister Binyamin Netanyahu.
"The United States was deeply disappointed by the announcement of advance planning for new housing units in sensitive areas of East Jerusalem," she said.
"This announcement was counterproductive to our efforts to resume negotiations between the parties. We have long urged both parties to avoid actions which could undermine trust, including in Jerusalem."
Earlier this week, Israel confirmed it was planning to build more than 1,300 new homes in annexed Arab East Jerusalem, prompting a furious reaction from the Palestinians.
Direct peace talks that began in early September quickly ran aground when an Israeli moratorium on West Bank settlement construction expired six weeks ago, prompting the Palestinians to freeze ties until Israel reimposes the ban.
Clinton also announced an extra $150 million in aid to the Palestinian Authority.
The amount was described as budget support for the Palestinians and is in addition to the $400 million in aid that President Barack Obama has pledged to the authority in June.
compiled from agency reports