U.S. President Barack Obama cautioned Tuesday that Israel's plan to construct 1,300 new homes in East Jerusalem could obstruct the pursuit of peace in the Middle East.

"This kind of activity is never helpful when it comes to peace negotiations," said Obama, adding that he was concerned Israel and Palestinian were not making enough of an effort to advance peace negotiations.

He also said he did not receive a briefing on the new construction, which was announced as Prime Minister Benjamin Netanyahu was visiting the United States.

The European Union earlier Tuesday urged Israel to reconsider its plan.

"This plan contradicts the efforts by the international community to resume direct negotiations and the decision should be reversed," EU foreign policy commissioner Catherine Ashton said in a statement. "Settlements are illegal under international law, constitute an obstacle to peace and threaten to make a two-state solution impossible."

The U.S. State Department said it was "disappointed" after it learned Monday that 1,300 Jewish homes had been approved for construction beyond the Green Line in East Jerusalem. Later in the day, it emerged that Israel had also approved second plan to build 800 homes in the West Bank settlement of Ariel.

The U.S. administration had been trying to persuade Netanyahu to declare a second settlement freeze in the territories. "We were deeply disappointed by the announcement of advance planning for new housing units in sensitive areas of East Jerusalem," said U.S. State Department Spokesman Philip J. Crowley. "It is counter-productive to our efforts to resume direct negotiations between the parties."

The plan for a new neighborhood in the western part of Ariel has been all but completed after years of litigation. Only the approval of the local planning and building committee is needed for the work to begin. The municipality supports the initiative.

The construction in Ariel has been the center of controversy between Israel and the United States. While Israel sees Ariel as part of a large settlement bloc, the United States sees it as a panhandle sticking into the West Bank, intended to prevent Palestinian territorial contiguity.

Last month Ariel Mayor Ron Nachman met with Netanyahu in Tel Aviv to discuss resuming construction in the city. "You don't know what efforts I'm making to keep Ariel," Netanyahu reportedly told him. "The whole world is against Ariel."

The area earmarked for Ariel's new neighborhood is next to the Palestinian town Salfit. The compound is divided in two - state-owned land and land privately owned by businessman Avraham Shamai. Shamai sold the land a few years ago, but the buyers did not keep up their end of the agreement and the land reverted back to Shamai after prolonged litigation.

Since this is privately owned land, the developer may put up fences and forge paths in preparation for construction with the approval of the municipal planning committee; he does not need the Defense Ministry's approval. Once the committee approves the plan, the construction may begin.

Nachman told the city council last month that "they approved a development contract. It's a very big thing."

He also spoke about building in other parts of Ariel. "We've resumed construction in the industrial area in Ariel west," Nachman said. "Plants that were frozen are being built now .... In the Moriah neighborhood we've begun construction. There are 100 homes there by [construction company] Netzarim and 195 others by another company; together that's 295."

Referring to the construction approval, Ariel council member Yaakov Emanuel told Haaretz that "the city is thriving. This means Ariel will stay part of Israel."

Over the weekend, the chairman of the Jerusalem District Planning and Building Committee, Ruth Yosef, published details of a program that will allow 930 housing units to be built in the Har Homa C area, with another 48 units in Har Homa B. An additional 320 units are planned for Ramot, also beyond the Green Line.

The plan's publication is an important step in the process of its final approval, due in a few months.

Jerusalem's municipal planning and construction committee issued building permits yesterday for 32 housing units in the Pisgat Ze'ev neighborhood in East Jerusalem.

Over the past year several diplomatic incidents have occurred when Israel published building plans in East Jerusalem around the time of meetings with senior U.S. officials. The worst row erupted in March during Vice President Joe Biden's visit to Israel over plans for 1,600 new Jewish homes in another East Jerusalem neighborhood, Ramat Shlomo.

Since then the prime minister has imposed rigorous restrictions on Jerusalem's planning committees to prevent further crises.

Officials familiar with planning issues said they were astonished by the timing of the publishing of these plans - on the eve of the prime minister's trip to Washington. Construction of the neighborhood in Har Homa at the end of the '90s, during Netanyahu's previous tenure as prime minister, led to a crisis with the U.S. administration.

Orly Noy, spokeswoman for nonprofit group Ir Amim, said on the plans' publication: "Israel is continuing to dictate, inch by inch, a dramatic reality in Jerusalem that will significantly hamper any peace solution in the future. This is especially blatant when the prime minister appears to be advancing a possible solution in his visit to the United States."

The Interior Ministry said the program's details had been published in accordance with the law and were approved long before they were published.