Israel has drawn condemnation by announcing plans to build more than 1,000 new homes for Jewish settlers in East Jerusalem and the West Bank.
Israel's Housing Minister Uri Ariel used the ministry's website to invite commercial bids for government tenders to build 1,200 homes on disputed territory.
"No country in the world takes orders from other countries about where it can and cannot build," Ariel wrote on the website.
The announcement came at a time of heightened sensitivity, as representatives of both sides hold talks in Washington brokered by US Secretary of State John Kerry, aimed at finding a final settlement to the conflict.
The plans drew immediate criticism from within Israeli government ranks.
Israel's Finance Minister Yair Lapid called them "unhelpful" to peace efforts.
Chief Palestinian negotiator Saeb Erekat denounced the construction plan: "The Israeli government must choose between negotiations and diktats.
"By announcing new bids every day and every week, Israel is out to destroy the negotiations before they start and destroy the principle of the two-state solution."
Palestinians say Israeli construction in the battle-won West Bank and east Jerusalem is a war crime that violates the Fourth Geneva Convention.
The plans must gain the backing of Israel's defence ministry before building work can begin.
The announcement opened divisions in Prime Minister Binyamin Netanyahu's ruling coalition, and within his own Likud party.
Lapid, the leader of the Yesh Atid Party, a coalition member, said: "This use of resources for middle-class housing to unnecessarily defy the US and poke sticks in the wheels of the peace talks is not right and is unhelpful to the peace process."
The announcement came as Israel prepares to release Palestinian prisoners as part of the deal it struck to get the talks restarted after a three-year breakdown.
The Obama administration has stopped short of demanding that Israel halt all settlement construction, unlike previous US governments.
The construction projects unveiled on Sunday included plans for almost 800 apartments in three areas of east Jerusalem, which was occupied by Israel in 1967.
A poll by the Israeli Peace Index, meanwhile, found 63% of Israelis are against the principle of land for peace.