JERUSALEM -- Israel is moving forward with development of Jewish settlements in a contentious area east of Jerusalem, defying the United States by advancing a project that has long been condemned by international leaders as effectively dooming any prospect of a two-state solution to the Israeli-Palestinian conflict.
One day after the U.N. General Assembly voted overwhelmingly to upgrade the Palestinians' status, a senior Israeli official, speaking on the condition of anonymity, said the government would pursue "preliminary zoning and planning preparations" for a development that would separate the West Bank cities of Ramallah and Bethlehem from Jerusalem -- preventing the possibility of a viable, contiguous Palestinian state.
The development, in an open area known as E1, would connect the large settlement town of Maale Adumim to Jerusalem. Israel also authorized the construction of 3,000 new housing units in parts of East Jerusalem and the West Bank.
The timing of the twin actions seemed aimed at punishing the Palestinians for their U.N. bid, and appeared to demonstrate that hard-liners in the government had prevailed after days of debate over how to respond. They marked a surprising turnaround after a growing sense in recent days that Israeli leaders had acceded to pressure from Washington not to react quickly or harshly.
"This is a new act of defiance from the Israeli government," Saab Erekat, the Palestinians' chief negotiator, said in a statement. "At a moment where the Palestinian leadership is doing every single effort to save the two-state solution, the Israeli government does everything possible to destroy it."
Much of the world considers settlements in East Jerusalem and the West Bank to be illegal under international law, and the United States has vigorously opposed development of E1 for nearly two decades. On Friday, Tommy Vietor, a White House spokesman, condemned the move, citing Washington's "longstanding opposition to settlements and East Jerusalem construction and announcements."
"We believe these actions are counterproductive and make it harder to resume direct negotiations or achieve a two-state solution," Mr. Vietor said. "Direct negotiations remain our goal, and we encourage all parties to take steps to make that easier to achieve."
The office of Prime Minister Benjamin Netanyahu refused to comment on the zoning and construction decisions, which were made Thursday night around the time of the General Assembly vote. But Israel has long maintained its right to develop neighborhoods throughout East Jerusalem and the West Bank -- more than 500,000 Jews already live there -- and Mr. Netanyahu, responding to the U.N. speech by President Mahmoud Abbas of the Palestinian Authority, said, "Someone who wants peace does not talk in such a manner."
While Israel has frequently announced settlement expansions at delicate political moments, often to its detriment, the E1 move came as a shock, after a week in which both Israelis and Palestinians toned down their rhetoric about day-after responses to the U.N. bid. Avigdor Lieberman, the ultranationalist foreign minister who for months denounced the Palestinian initiative as "diplomatic terrorism" and said Israel should consider severe sanctions against the Palestinian Authority, told reporters in recent days that there would be "no automatic response."
Mr. Erekat's spokesman declined to discuss whether the Palestinians would use their upgraded status, as a nonmember observer state with access to U.N. institutions, to pursue a case in International Criminal Court regarding E1 or the other settlement expansion. Less contentious moves were already in progress: the Palestinian Authority has begun changing its name to "Palestine" on official documents, contracts and websites, and several nations are considering raising the level of diplomatic relations, giving Palestinian envoys the title of ambassador.
All but one European country voted with the Palestinians or abstained in Thursday's U.N. vote, many of them citing concerns about settlements in West Bank and East Jerusalem territories Israel captured in the 1967 war. The settlement of E1, a 4.6-square-mile expanse of hilly parkland where some Bedouins have camps and a police station was opened in 2008, could further increase Israel's international isolation.
After a day in which Israeli government officials insisted that the U.N. vote was a purely symbolic one that had not changed anything on the ground, the revelation of the developments late Friday stunned and outraged even some of Mr. Netanyahu's supporters.
"A number of important countries are telling us that they think it's wrong to do settlements, and these are our best friends," noted one senior government official, speaking on the condition of anonymity for fear of being fired. "After they say this directly or indirectly, the immediate response is to build more settlements, even in one of the most controversial areas, E1? How does that make sense? What is the message the government is sending its best friends?"
It is hardly the first time Israel has been criticized for awkward timing on settlement expansion. But E1 is more contentious than previous projects combined. Presidents Bill Clinton, George W. Bush and Mr. Obama have all strenuously objected to any settlement there, and it is internationally known as the third rail for the peace process.world