Israeli Prime Minister Benjamin Netanyahu dismissed the Obama Administration's demand that the Jewish state suspend building twenty new apartments in an Arab neighborhood in East Jerusalem.
Netanyahu told cabinet ministers that a united Jerusalem is the capital of Israel and Israel's sovereignty over Jerusalem cannot be challenged.
"I can only imagine what would happen if someone suggested Jews could not live in certain neighborhoods in New York, London, Paris or Rome. There would certainly be a major international outcry," Netanyahu said.
The prime minister's statement drew an angry response from the Palestinian Authority. However, an Israeli government minister says Israel has every right to build in its capital.
"This undermines the peace process," Chief Palestinian Negotiator Saeb Erekat said. "This undermines the efforts being exerted to revive the peace process and this undermines the credibility of those involved in making the peace process continue."
Building settlements on captured lands claimed by the Palestinians has become a major obstacle in relations between Israel and the Obama administration. The settlements have the potential to disrupt the Mideast peacemaking process.
Gilad Erdan, Israeli Environment Protection Minister said Israel does not tell the Palestinians whether to build in the West Bank city of Ramallah.
"So they don't need to tell us whether to build in Jerusalem because this is our capital city," he added.
Netanyahu said Israel has a longstanding policy that residents of the city can purchase apartments in all parts of Jerusalem.
Speaking on her trip to New Delhi, India on Sunday U.S. Secretary of State Hillary Clinton said the administration was trying to reach a settlement with Israelis.
"The negotiations are intense. They are ongoing," she said.
Nearly 300,000 Israelis live in West Bank settlements and 180,000 Israelis live in Jewish neighborhoods in East Jerusalem.