Israeli settlements condemned by Western powers
The US has joined criticism of Israel's decision to accelerate settlement building in the West Bank and East Jerusalem after Palestinians joined UN cultural agency, Unesco.
White House spokesman Jay Carney said the US was "deeply disappointed".
Earlier, the EU said it was "deeply concerned" by the announcement. The UK, France and Germany said it would hinder efforts for peace.
Israeli PM Benjamin Netanyahu said it was a "basic right of our people".
Mr Carney told a White House briefing that Israel's decision did not help bring peace talks any nearer.
"Unilateral actions work against efforts to resume direct negotiations, and they do not advance the goal of a reasonable and necessary agreement between the two parties," Mr Carney said.
"That is the only way to achieve the two-state solution that both sides have as their goal."
EU policy chief Catherine Ashton urged Israel to reverse the decision and called on both sides to return to the negotiating table.
"Israeli settlement activity is illegal under international law including in East Jerusalem and an obstacle to peace. We have stated this many times before," she said.
British Foreign Secretary William Hague called the Israeli move "provocative and unhelpful".
"This settlement building programme is illegal under international law and is the latest in a series of provocative and unhelpful settlement announcements," Mr Hague said in a statement.
He also criticised Israel's temporary withholding of Palestinian tax revenues, which was announced at the same time, and called for a reversal of both decisions.
French foreign ministry spokesman Bernard Valero said the proposed settlement building "is illegal in international law and is a threat to the two-state solution".
Steffen Seibert, German Chancellor Angela Merkel's spokesman, said building settlements in occupied areas "hinders the goal we all must have of a two-state solution and is unjustifiable".
UN Secretary General Ban Ki-moon also said he was "deeply concerned" by the development.
"The secretary general calls on the government of Israel to freeze all settlement activity and to continue to transfer VAT and customs revenues that belong to the Palestinian Authority and are essential to enable it to function, in line with Israel's obligations," his spokesman Martin Nesirky said.
Israeli Prime Minister Benjamin Netanyahu's office said on Tuesday that a plan to build 2,000 new apartments in the West Bank and East Jerusalem would be accelerated.
Palestinian Authority President Mahmoud Abbas has said the move would speed up the destruction of the peace process.
The step has been seen by Palestinians as a response to their Unesco membership bid.
On Monday, Unesco member states overwhelmingly backed the Palestinians' membership bid, despite opposition from the US and Israel. The US says it will no longer make payments to Unesco.
Israel also said it would temporarily freeze transfers to the Palestinian Authority, which amount to around half of the PA's domestic revenue base.
An Israeli foreign ministry spokesman said on Tuesday the move was "a response to unilateral measures aimed at confronting Israel at the UN and elsewhere on the international scene".
But Mr Netanyahu denied that his government's decision was "punishment".
"We are building in Jerusalem because it is our right and our duty to this generation and future generations, not as punishment but as the basic right of our people to build in its eternal city," he said on Wednesday.
"Jerusalem will never return to the state it was in on the eve of the (1967) Six-Day War, that I promise you."
Peace talks between the Palestinians and Israel broke down more than a year ago. The Palestinians are demanding an end to settlement building.
Almost 500,000 Jews live in settlements on occupied territory. The settlements are illegal under international law, although Israel disputes this.