Elisha Peleg, a councillor from the right-wing Likud party, confirmed that the new construction in Gilo, close to the West Bank city of Bethlehem, had been approved during an afternoon session of the district planning council.
"Of course we approved it, it is only the first step," he told AFP, saying it was approved by five in favour and one against.
The municipality said this project was in addition to an earlier tranche of more than 900 new homes in Gilo approved in November 2009, which brought sharp condemnation from Washington which expressed "dismay" over the move.
The latest decision came a day ahead of a top-level meeting at the White House between Israeli President Shimon Peres and US President Barack Obama.
Gilo lies in mostly Arab east Jerusalem, which Israel captured along with the West Bank from Jordan in the 1967 Six Day War and later annexed in a move not recognised by the international community.
Israel considers both halves of the Holy City its "eternal, indivisible" capital, and does not view construction in the east to be settlement activity.
The Palestinians, however, want east Jerusalem as the capital of their future state and fiercely contest any actions to extend Israel`s control over the sector.
Some 180,000 Israelis live in east Jerusalem alongside nearly 270,000 Palestinians.
On Friday Israeli settlement watchdog Peace Now said that an Israeli landowner was seeking to sell plots for 30 homes in another mainly Palestinian neighbourhood of Jerusalem, where 117 settler families already live.
The international community has repeatedly called on Israel to avoid new building projects in east Jerusalem.
US-brokered peace negotiations between Israel and the Palestinians are deadlocked over the issue of Jewish settlements in the occupied West Bank and east Jerusalem.
The Palestinians walked out of direct peace talks three weeks after they started last September when Israel baulked at extending a 10-month partial freeze on settlement construction in the West Bank.
They refuse to negotiate with Israel while it builds on land they want for a future Palestinian state.
In March 2010, the interior ministry announced a plan to build 1,600 settler homes in Ramat Shlomo, an Orthodox Jewish neighbourhood in east Jerusalem.
The announcement, which came as US Vice President Joe Biden was visiting Israel, provoked fierce American opposition and soured relations with Washington for several months. (*)
Editor: Kunto Wibisono
Copyright © ANTARA 2011
