Egypt on Friday condemned Israel's plan to construct 2,000 new housing units in East Jerusalem and the West Bank, announced earlier this week.
"This decision is a blow to all efforts being made to reach a fair settlement to the conflict and the Palestinian problem," Egyptian Foreign Minister Mohamed Amr said.
He accused Israel of provoking the Palestinians and "disregarding the international will that has unanimously rejected the construction of settlements and considered it an obstacle to peace."
Prime Minister Benjamin Netanyahu announced the plan on Tuesday.
Egypt was the first Arab country to sign a peace treaty with Israel in 1979 and has played a key role in mediating peace talks between Palestinians and Israelis since the 1990s.
But Egypt's relations with Israel have been tense since the ouster of former President Hosni Mubarak in February.
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