Israel's plan to build new homes on occupied land should be countered by international recognition of a Palestinian state, the chief Palestinian negotiator said on Tuesday.
Raising the stakes in the deadlock over stalled peace talks, Saeb Erekat said it was clear from the latest announcement of building plans that Israel wants settlements, not peace.
"Israeli unilateralism is a call for immediate international recognition of the Palestinian state," he said in a statement.
The world paid little attention when the late Yasser Arafat declared a Palestinian state in 1988. But political winds have shifted and Israel today is seriously concerned that Palestinian President Mahmoud Abbas might win recognition.
Abbas has floated the idea of "going to the United Nations" to declare statehood as one option if peace talks collapse, but only after first seeking support from Washington.
Israel on Monday announced plans to build 1,300 new housing units on occupied land near Jerusalem, and on Tuesday news reports said a further 800 units were planned in the big settlement of Ariel in the northern West Bank.
The building plans were made public as Israeli Prime Minister Benjamin Netanyahu was in the United States to discuss ways to revive Middle East peace talks that have stalled over the issue of settlement building.
The United States said it was "deeply disappointed" by Monday's news of the housing project which is "counterproductive to our efforts to resume direct negotiations between the parties", State Department spokesman P.J. Crowley said.
Secretary of State Hillary Clinton was expected to raise the issue in a meeting with Netanyahu in New York on Thursday.
European Union foreign affairs chief Catherine Ashton said the plan "contradicts the efforts by the international community to resume direct negotiations and the decision should be reversed".
She added: "Settlements are illegal under international law, constitute an obstacle to peace and threaten to make a two-state solution impossible."
Direct peace talks between Israel and the Palestinians broke down in September almost as soon as they had begun, after Netanyahu rebuffed Palestinian demands to extend a partial freeze on West Bank settlement building.
Noting that the controversial housing announcement was made while Netanyahu was in the United States, Crowley said: "It could very well be that somebody in Israel has made this known in order to embarrass the prime minister and to undermine the process".
Washington was outraged in March when settlement housing plans were announced with what looked like defiant timing as U.S. Vice President Joe Biden was visiting Jerusalem.
Israeli Interior Ministry spokeswoman Efrat Orbach said Monday's announcement was simply another procedural stage. "It can take months or years from this point until building can actually begin," she said.
The Palestinians dismissed this explanation.
"Israel's settlement enterprise ... is nothing but a premeditated process to kill the possibility of an independent Palestinian state," Erekat said.
Palestinian Prime Minister Salam Fayyad embarked on a two-year plan in 2009 to construct the complete institutional framework of a state by mid-2011. It has won European Union backing and warnings from Israeli analysts that Fayyad should be taken seriously.
"I firmly believe this can happen, that it will happen. We need to build up a sense of inevitability about this. I think it will happen next year," Fayyad told Reuters in an interview earlier this month.
"The more it is seen to be inevitable, the more likely it will get to a resolution," he added.
The prospect of the United States recognising an independent Palestine without the agreement of Israel seems very remote. But Israeli analysts speculate that President Barack Obama could threaten to abstain rather than veto a U.N. resolution if he believes Israel is obstructing the path to a peace treaty.
A World Bank report last month said that if the Palestinian Authority keeps up its "performance in institution-building and delivery of public services, it is well-positioned for the establishment of a state at any point in the near future".
Israel captured East Jerusalem, along with the West Bank, in 1967 and regards all of Jerusalem as its capital, including the two neighbourhoods where new housing has been approved.