Hagit Ofran of the settlement watchdog Peace Now said 900 hundred homes have been approved in Ramat Shlomo. Israel first announced the plans in 2010 during Vice President Joe Biden's visit to Israel, sparking a diplomatic spat with Washington.
US State Department spokesman Jeff Rathke yesterday called it "damaging and inconsistent" with resolving the conflict between Israel and the Palestinians with a two state solution.
Israel captured east Jerusalem with its Jewish, Christian and Muslim holy sites from Jordan in the 1967 war.
"The secretary-general is deeply concerned by recent announcements of plans by Israeli authorities for 900 settlements in East Jerusalem that are illegal under international law," the spokesman for Ban Ki-moon, Stephane Dujarric, told reporters yesterday.