Israel gave preliminary approval on Tuesday to the construction of 1,100 housing units in East Jerusalem, brushing aside pleas from U.S. and European diplomats to delay the controversial project as they attempt to restart peace talks.

The Interior Ministry's green light will clear the way for a significant expansion of the Jewish development of Gilo, which is on land seized by Israel during the 1967 Six-Day War.

Critics said the move is a setback for the Mideast Quartet -- the United States, the United Nations, the European Union and Russia -- which last week issued a call for Israelis and Palestinians to resume direct talks within the next month.

Neither side has formally responded to the Quartet initiative, but chances of a return to the negotiating table were seen as slim even before the Gilo expansion was announced. Palestinians are demanding that Israel halt all settlement construction in the West Bank and East Jerusalem. Israeli Prime Minister Benjamin Netanyahu has refused, saying Palestinians squandered the opportunity for talks offered by a partial construction freeze he imposed in the West Bank last year.

"Mr. Netanyahu is responding to the Quartet with 1,100 'no's,' " Palestinian negotiator Saeb Erekat said. "He's determined to torpedo the two-state solution and the peace process."

In an interview with the Jerusalem Post published on Tuesday, Netanyahu ruled out another settlement freeze and defended the Gilo expansion.

"We build in Jerusalem. Period," he said. "The same way Israeli governments have been doing for years, since the end of the 1967 war. We build in Jewish neighborhoods. The Arabs build in Arab neighborhoods. That is the way the life of this city goes on and develops for its Jewish and non-Jewish residents alike."

Palestinians plan to announce their response to the Quartet plan on Wednesday. LOS ANGELES TIMES