Israel is moving forward with a plan to build nearly 900 new housing units in Jerusalem.
Palestinians claim the move undermines the new peace talks and they persistently object to Israeli construction, arguing that Israel is building on their land.
Mark Regev, spokesman for Prime Minister Benjamin Netanyahu, said they are building in East Jerusalem, which is part of the Jewish capital.
"Israel is only building in areas where there's a clear consensus that they will stay part of Israel in any final status peace agreement," Regev said.
"We are building in Jerusalem and the large blocs and in every peace plan that's been on the table in the last 15 years, those areas stayed part of Israel and I fail to see how building in these areas prevents the peace process from moving forward," he said.
Meanwhile, The New York Times reports Palestinians are building an entirely new city in the West Bank, the biblical area known as Judea and Samaria.
Israel is not objecting.