Palestinian officials on Friday condemned a plan to build 1,550 housing units in east Jerusalem, authorized the day Prime Minister Binyamin Netanyahu set off for talks in Washington.
An Interior Ministry spokeswoman said a planning committee had approved two building projects in the east Jerusalem neighborhoods of Pisgat Zeev and Har Homa.
The spokeswoman did not say when construction was expected to start.
Saeb Erekat, a senior aide to Palestinian Authority President Mahmoud Abbas, said the Israeli move further hampered US efforts to revive Israeli-Palestinian peace talks, which collapsed last year shortly after they began because of settlement building.
"When the whole world and US President Barack Obama are working to revive the negotiations and the peace process, the Israeli government is determined to undermine and sabotage these efforts," Erekat said.
Netanyahu is due to hold talks with Obama on Friday in what could be a tense meeting after the American leader on Thursday endorsed a longstanding Palestinian demand that the borders of any future state should be based on 1967 lines.
Netanyahu, who has had strained relations with Obama, headed for Washington saying the president's vision of a Palestinian state along these borders could leave Israel "indefensible".
Obama's emphasis on 1967 borders went further than before in offering principles for resolving the stalemate between Israel and the Palestinians. But he stopped short of presenting a formal US peace plan or suggesting how talks should resume.
Abbas welcomed Obama's efforts to renew negotiations, and had made plans to convene an "emergency" session of Palestinian and Arab officials to weigh further steps, a senior aide said.
But Abbas did not comment on Obama's firm rejection of a Palestinian drive to seek recognition of their statehood at the United Nations in September at the annual meeting of the UN General Assembly.
Palestinians say settlement plans are regularly unveiled when senior Israeli politicians are due to meet their US counterparts.