Biden condemns new Israeli settlement plan

US Vice President Joe Biden has condemned an Israeli plan to build hundreds of homes in disputed east Jerusalem on Tuesday - a disagreement that tarnished a high-profile visit that had been aimed at repairing ties with the Jewish state and kickstarting Mideast peace talks.

Israel's Interior Ministry earlier said it had approved construction of 1600 new apartments, an embarrassing setback for Biden after a day of warm meetings with top Israeli officials.

Although ministry officials said the announcement was procedural and unconnected to the visit, a top aide to Prime Minister Benjamin Netanyahu said he was blindsided and tried to contain the damage at a late-night dinner with Biden.

Nonetheless, Biden issued a harshly worded statement after the dinner, saying its timing was especially troubling by coming on the eve of a new round of US-mediated peace talks.

"The substance and timing of the announcement, particularly with the launching of proximity talks, is precisely the kind of step that undermines the trust we need right now," Biden said.

"We must build an atmosphere to support negotiations, not complicate them," he added, warning that "unilateral action taken by either party cannot prejudge the outcome of negotiations."

Relations between Israel and the Obama administration have been chilly precisely because of the settlement issue, and one of Biden's main goals had been to try to patch up ties.

Biden is the highest-level member of the Obama administration to visit Israel.

The US, like the Palestinians and the rest of the international community, believes that Israeli settlements built on lands claimed by the Palestinians, including east Jerusalem, undermine peace prospects. President Barack Obama has been more outspoken on the issue than his predecessors.

UN Secretary-General Ban Ki-moon condemned the plans in a statement, saying they undermine "any movement towards a viable peace process."

Netanyahu has rebuffed calls from the White House to halt all settlement activity, agreeing only to a limited freeze that does not include east Jerusalem. Israel captured both areas in the 1967 Mideast war and subsequently annexed east Jerusalem.

Israel considers its east Jerusalem neighbourhoods to be part of its undivided capital, but the annexation has never been internationally recognised and the neighbourhoods are widely seen as settlements.

Interior Ministry spokeswoman Efrat Orbach said the new homes would be built in Ramat Shlomo, an existing neighbourhood for ultra-Orthodox Jews. She noted that there is a 60-day appeals period, indicating that the decision could yet be changed.

Netanyahu told Biden he was caught off guard by the ministry's announcement, a top Israeli official said, speaking on condition of anonymity.

While Netanyahu considers east Jerusalem to be part of Israel, he acknowledged the timing of the announcement was poor and said he had no intention of sabotaging Biden's visit. He stressed  there are no plans to begin construction anytime soon.

But Palestinian negotiator Saeb Erekat said the move soured the negotiating climate. The two sides agreed this week to begin indirect negotiations under the mediation of US envoy George Mitchell. Peace efforts have been stalled for 14 months, in large part because of Palestinian anger over settlement activity.

"With such an announcement, how can you build trust? This is destroying our efforts to work with Mr. Mitchell," Erekat said. "It's a really disastrous situation. I hope that this will be an eye-opener for all in the international community."