Defending Israel's interior ministry decision to build new housing units in the Gilo neighborhood, a senior Israeli official said on Wednesday that the site is neither a settlement nor a settlement outpost but a neighborhood which constitutes an integral part of the center of al-Quds.
Palestinian leaders, however, say Tel Aviv's decision to expand Jewish settlements in Gilo, which mostly lies in the Arab east al-Quds, has effectively rebuffed a recent proposal by Israeli Prime Minister Benjamin Netanyahu for the resumption of direct negotiations.
The United States, China and several European countries have also condemned the Israeli decision, saying it is against the two-state solution.
Gilo is built on the land captured by Israel in 1967. Tel Aviv later annexed the area to the al-Quds municipality in a move not recognized by the international community. Tel Aviv claims that areas within the Jerusalem municipality are not settlements.
The Israeli decision to expand Gilo by several hundred meters to the south came days after Netanyahu, in a speech in the UN General Assembly, invited Palestinians into direct talks, saying the decades long conflict between the two sides will only be resolved through negotiations.
Palestinians have repeatedly said that new round of talks with the Israeli regime cannot be resumed unless there is a complete halt in settlement expansion activities.
The controversial move also came days after Palestinian Authority Chief Mahmoud Abbas handed in his request for full UN membership for an independent Palestinian state.
Palestinians want East al-Quds as the capital of their future state.