Har Homa, 8 November The start of construction in Har Homa in the late 1990s caused a major conflict with the US
Israel has revealed plans to build nearly 1,300 housing units for Jewish settlers in occupied East Jerusalem.
Building settlements is illegal under international law and recent efforts to revive Israeli-Palestinian peace talks have stalled over the issue.
The announcement comes as Israel's Prime Minister, Benjamin Netanyahu, is on an official visit to the US.
Palestinian officials have reportedly described the move as an Israeli attempt to sabotage the talks.
"We thought that Netanyahu was going to the United States to stop settlement activity and restart negotiations, but it is clear to us that he is determined to destroy the talks," chief Palestinian negotiator Saeb Erekat was quoted as saying by the AFP news agency.
The Interior Ministry said that final approval had been given for almost 1,000 new homes in the East Jerusalem settlement of Har Homa, near the Palestinian town of Bethlehem, and about 300 in an area called Ramot.
A ministry spokeswoman told the BBC that the plans were being published to invite public comment and that actual construction was likely to be years away.
East Jerusalem is regarded as occupied Palestinian territory by the international community, but Israel says it is part of its territory.
'Casting a shadow'
Israel has been urged by many foreign governments, including the United States, to resume a partial building freeze in settlements on the occupied West Bank and to maintain an unofficial status quo in East Jerusalem, in order to help faltering peace talks with the Palestinians.
The news that more than 1,000 new homes have been approved in East Jerusalem could cast a shadow over a visit to the US by Mr Netanyahu, says the BBC's Wyre Davis in Jerusalem.
Israel angered the US administration earlier this year when a similar announcement was made during a trip to Jerusalem by US Vice-President Joe Biden.
Mr Biden and other US officials are holding meetings this week with the Israeli leader about ways to resume the peace talks - and peace campaigners say the latest announcement from the Israeli government is deliberately provocative, our correspondent says.
The Palestinians have refused to go back to the negotiations - which resumed in Washington in September after a break of almost 20 months - without a stop to building Jewish settlements on the territory they want as their future state.
Israel has occupied the West Bank, including East Jerusalem, since 1967, settling close to 500,000 Jews in more than 100 settlements.