The United States is concerned over the approval of a plan to build 600 new housing units in East Jerusalem, the State Department said on Monday, adding that both Israel and the Palestinians should refrain from unilateral actions which could undermine trust between the two parties.

The Jerusalem District Planning and Construction Committee approved last Thursday a plan to build a new neighborhood beyond the Green Line, near Pisgat Ze'ev north of Jerusalem.

The plan, which had been suspended in recent years due to land-ownership problems, was recently reduced from 1,100 housing units to 600, excluding 30 dunams of privately-owned land.

"We have seen reports that plans for 600 housing units in Pisgat Ze'ev in East Jerusalem, originally deposited in 2008, have advanced in the approval process, although we understand that the total number of units has been reduced from the original plan," State Department Spokesman Philip J. Crowley told reporters.

"We also understand that this is not a final approval for the project, but it is a step in that direction," Crowley said.

However, while recognizing that the approved plans represented a reduced number of housing units to be built in the Pisgat Ze'ev area, Crowley expressed what he called the administrations "strong concerns to the Government of Israel that this kind of activity, particularly as we try to relaunch meaningful negotiations, is counterproductive and undermines trust between the parties,"

Crowley also said that the U.S. continued "to urge both parties to refrain from unilateral actions that, whether intended to or not, undermine trust and efforts to resume negotiations that will bring an end to the conflict and result in a two-state solution."

"We believe it is of great importance that negotiations between Israel and the Palestinians resume as soon as possible," the State Department spokesman said.

Early last month, Interior Minister Eli Yishai moved toward legalizing Jewish ownership of an East Jerusalem building, authorizing the district planning commission to take on the matter without first notifying Prime Minister Benjamin Netanyahu.

Prime Minister Benjamin Netanyahu's office said he was not involved in the matter.

Yishai's move was exposed by Israel's Channel 1 hours after the Jerusalem Municipality canceled the distribution of evacuation orders for Beit Yonatan, a residential building erected by nationalist Jews in the heart of an Arab neighborhood in East Jerusalem.

Yishai confirmed that he had ordered the move and had received assurance that a majority of the council would vote in favor of the move.

The interior minister also said that the residents of Beit Yonatan agreed to move their occupancy two floors down, making it legal. Yishai added that the council was expected to approve a similar move on other contentious buildings in the area.