Jerusalem's municipal council has approved the expansion of 2,000 homes in the settlement district of Ramat Shlomo.
The Interior Ministry said in a statement that "an additional room will be built in each of these 2,000 homes in response to the needs of the numerous families suffering from housing problems in this area."
The Ramat Shlomo neighborhood lies in an area of Arab East Jerusalem that Israel captured during the 1967 Six Day War and later annexed in a move not recognized by the international community.
Israel's construction or expansion of homes in the area has drawn criticism from European capitals and Washington in the past, and settlement building in Ramat Shlomo led to a crisis in relations with the United States last year.
Also, EU foreign-policy chief Catherine Ashton held talks with Israeli Prime Minister Binyamin Netanyahu as the international community seeks to relaunch peace talks.
Neither side issued a statement after the afternoon discussions.
compiled from agency reports