Israel's decision to approve 1,600 new homes in an ultra-Orthodox East Jerusalem neighborhood is undermining Middle East peace talks, U.S. Vice President Joe Biden said in Jerusalem on Tuesday.

Earlier Tuesday, the Interior Ministry approved the building of 1,600 new housing units in Ramat Shlomo, with a ministry official saying the plan will expand the ultra-Orthodox East Jerusalem neighborhood to the east and to the south.

"I condemn the decision by the government of Israel to advance planning for new housing units in East Jerusalem," Biden said.

The American vice president added that the "substance and timing of the announcement, particularly with the launching of proximity talks, is precisely the kind of step that undermines the trust we need right now and runs counter to the constructive discussions that I?ve had here in Israel."

"We must build an atmosphere to support negotiations, not complicate them," Biden said adding that the "announcement underscores the need to get negotiations under way that can resolve all the outstanding issues of the conflict," Biden said.

"The United States recognizes that Jerusalem is a deeply important issue for Israelis and Palestinians and for Jews, Muslims and Christians."

Biden also said that the U.S. believed "that through good faith negotiations, the parties can mutually agree on an outcome that realizes the aspirations of both parties for Jerusalem and safeguards its status for people around the world."

"Unilateral action taken by either party cannot prejudge the outcome of negotiations on permanent status issues. As George Mitchell said in announcing the proximity talks, 'we encourage the parties and all concerned to refrain from any statements or actions which may inflame tensions or prejudice the outcome of these talks,'" Biden said.

The Palestinian Authority had also remarked on the announced plan Tuesday , saying that it ended efforts to renew negotiations with Israel.

The statement approving the 1,600 new houses, released by the Interior Ministry's Jerusalem district planning committee, headed by Ruth Yosef, said that at least 30 percent of the units will be allocated to young couples.

Public facilities and spaces which were, the statement said, lacking in the existing parts of the neighborhood, are also to be added as part of the new plan, including a new central park.

Also Tuesday, the Palestinian Authority said that Israel's decision to approve new East Jerusalem houses effectively prevents any peace negotiations from taking place.

Director of policy and strategy of the U.S. pro-peace organization J Street, Hadar Susskind, said in a statement that the organization joined Biden "in condemning Israel's announcement of new East Jerusalem construction that only serves to hinder Middle East peace efforts, particularly as the Israelis and Palestinians begin proximity talks."

"Continued construction in East Jerusalem and the West Bank only diminishes the chances of achieving a viable two-state solution to the conflict," Susskind added.

The statement also said that Israel's approval of new East Jerusalem homes marked a "disappointing inflaming of tensions and undermining of trust - and is particularly surprising given Vice President Biden's present visit to Israel aimed at underscoring the U.S.-Israel relationship and the American commitment to a two-state resolution of the conflict."

"We echo Vice President Biden's call for all parties to refrain from unilateral actions that may inflame tensions and prejudice the outcome of peace talks," the J Street statement added, saying that "If we are to achieve a true resolution to the conflict - and secure Israel's future as a Jewish, democratic homeland - all sides must demonstrate their commitment to the diplomatic and constructive engagement needed to succeed."

Meir Margalit, Meretz's representative to the Jerusalem city council, claimed that the statement was meant to disrupt the Biden visit, saying that he had "no doubt that the timing isn't coincidental," calling the announcement Interior Minister Eli Yishai's "answer to Netanyahu's willingness to renew indirect peace talks with the Palestinians."

"The fact that Eli Yishai couldn't restrain himself for another two-three days until Biden left Israel means his intention was to slap the U.S. administration in the face," Margalit said, adding that the announcement was "a provocation to the U.S. and to the prime minister."

Following a request for a statement by Prime Minister's Office, Yishai said in response that the timing of the announcement had no connection to Biden's visit.

The Interior Ministry had announced the decision to build 1,300 new homes in Ramat Shlomo, in 2008, with the approval of the regional planning board as part of Jerusalem's housing master plan.

Palestinian negotiator Saeb Erekat at the time called the announcement part of "a systematic policy to destroy the peace process," urging then secretary of state Condoleezza Rice to make the issue her top priority.