The Construction Ministry's proposed budget for 2008 includes 500 apartments for the Har Homa neighborhood in east Jerusalem.
Plans to build 340 apartments in that same neighborhood, announced earlier this month, upset the first round of negotiations Israel and the Palestinians conducted in seven years.
An additional 240 apartments are planned for construction in Maaleh Adumim just outside Jerusalem, one of Israel's biggest settlements, according to the budget. Israel intends to hold on to Maaleh Adumim, home to more than 30,000 settlers, in any final peace deal.
Rafi Eitan, Cabinet minister for Jerusalem affairs, told Army Radio that Israel never promised to halt construction within the municipal borders of Jerusalem, whose eastern sector Israel annexed after capturing in the 1967 Mideast war. The international community never recognized the annexation.
``Har Homa is an integral, organic part of Jerusalem,'' Eitan said. ``No promise was ever given to anyone that we wouldn't continue to build in Har Homa, because it's within the municipal borders of Jerusalem.''
Maaleh Adumim, Eitan added, ``is an integral part of Jerusalem in any peace accord.''