Jerusalem ( CNN ) -- In a blow to efforts to keep direct negotiations between Israelis and Palestinians from faltering , the Israeli government is planning to construct new housing units in East Jerusalem , Israeli and U.S. sources confirmed Friday . Israeli Army radio reported earlier that the Israeli Housing and Construction Ministry issued a bid for 238 houses as part of a larger tender for housing construction in the country . The report said Prime Minister Benjamin Netanyahu was aware of the process , and that the American government had been notified . Two U.S. officials , speaking on condition of not being identified by name , told CNN that Israel had notified the United States of the plan , but they added there was no agreement from Washington that it should go ahead . `` This was in no way done with U.S. approval , '' one official said . `` The government of Israel informed us to the intent to announce new tenders , and at every opportunity we urged the Israelis not to proceed . '' An Israeli official speaking on condition of not being identified by name also said Israel told the United States of its intention . A spokesman for Netanyahu would not comment on the report . Palestinian negotiator Saeb Erakat condemned the move , saying that the Israeli prime minister has chosen `` settlements over peace . '' `` We hold him responsible for undermining the direct negotiations , and I call upon the U.S. and other members of the international community to condemn this act and to hold the Israeli government responsible for the derailment of the direct negotiations , '' Erakat said . The issues of housing construction in East Jerusalem and West Bank settlement building have been major sticking points in the newly revived direct talks between Israelis and Palestinians.The move would represent the first tender for East Jerusalem construction since March , when the Israeli government announced the construction of 1,600 housing units in East Jerusalem while U.S. Vice President Joseph Biden was visiting Israel . That announcement strained relations between Washington and the government of Netanyahu . The new East Jerusalem units would be built in the neighborhoods of Pisgat Ze'ev and Ramot , which are home to thousands of Jewish residents . The two neighborhoods are in the northern part of the city , but commonly considered part of East Jerusalem because they are located east of the Green Line , the armistice line that separated Israel from Jordan when Jordan controlled East Jerusalem and the West Bank prior to 1967 . Israel seized East Jerusalem from Jordan during the Six Day War in 1967 and considers it part of its sovereign capital , a claim not recognized by many in the international community . Palestinians want East Jerusalem as the capital of their future state . Also Friday , a report on Egypt 's state-run news agency MENA said Egyptian Foreign Minister Ahmed Aboul Gheit raised the possibility of the Arab League calling for a Palestinian state to get a seat at the U.N. General Assembly . Such a move would bolster the Arab League 's call for full international recognition of a Palestinian state . CNN 's Elise Labott contributed to this story .
NEW : However , Israeli sources confirm Israel provided advance notice of plans . The new construction will be in the neighborhoods of Ein Ze'ev and Ramot . Israel 's Prime Minister Benjamin Benjamin was informed of the move . Palestinian source says Israeli prime minister has " ` ` settlements over peace ''