City spokeswoman Brachie Sprung said today that city officials approved plans to lay down infrastructure for the project. She called the move a "standard and bureaucratic process" and said actual construction is still years away.
Still, the move could threaten recently renewed Israeli-Palestinian peace talks. Settlement construction in the West Bank and east Jerusalem are among the thornier issues between the sides.
The building in question pertains to the neighborhood of Ramat Shlomo, a project that has also raised tensions with the US Israel first announced the project in 2010 during a visit to Israel by Vice President Joe Biden, causing a diplomatic rift with Washington that took months to mend.