Israel announced plans to build more than 300 new homes in a disputed east Jerusalem neighbourhood, drawing quick Palestinian condemnations that the move will undermine newly revived peace talks.
The new housing would expand Har Homa, a Jewish neighbourhood in an area Palestinians claim as capital of a future state. Palestinian officials appealed to the US to block the project.
The Israeli announcement on Tuesday focused attention on one of the most difficult issues facing Israeli and Palestinian negotiators in peace talks that are supposed to resume this month -- the future of Jerusalem.
Channel 2 TV reported late on Tuesday that US President George W Bush will visit Israel next month for the first time in his presidency. The report said he would focus on Israel-Palestinian peace talks and Iran's nuclear programme.
Officials at the US Embassy in Tel Aviv would neither confirm nor deny the report.
Other Israeli media outlets reported the Bush visit would take place on January 9. Israeli government officials refused to comment.
Israeli Housing Ministry spokesman Kobi Bleich said 307 housing units would be built in Har Homa About 4,000 Israelis live there now.
Also on Tuesday, Israel pledged to press ahead with its campaign against militants in Gaza, responding to almost daily rocket barrages at Israel. The military said that yesterday, 21 rockets and mortars were fired at Israel by nightfall, bringing the 12-month total to over 2,000.