In the face of criticism from the Palestinian Authority, the United States and the UN, Israeli housing minister Zeev Boim has defended a decision to expand Jewish housing in parts of East Jerusalem considered as settlements by the international community.

Mr Boim said that the decision to build nearly 900 units at Har Homa and in Givat Zeev was taken with the “knowledge and approval” of Prime Minister Ehud Olmert and underlined the government’s policy to maintain Jerusalem as an undivided capital.

“Jerusalem must remain the capital of Israel and undivided, but solutions must be found for the large Arab population,” he said.

It is the largest planned settlement expansion announced since the Annapolis summit in November, when Israel reaffirmed its commitment to a settlement freeze.

The announcement came two days in advance of Jerusalem Day, which marks the capture of East Jerusalem during the Six-Day War.

Palestinian President Mahmoud Abbas came under fire from Hamas for meeting Mr Olmert, despite the settlement expansion, while the US said the move “exacerbates tensions”. Sami Abu Zuhri, the Hamas spokesman, said that Mr Abbas was “giving cover to settlement, Judaisation, and aggression” in Jerusalem.

But Fatah lawmaker Abdallah Abdallah defended Mr Abbas, saying “the president has to act according to his responsibility to protect the interest of his people and to put forward our opinion so that the world knows the obstacle to peace is coming from the Israeli side”.

Hagit Ofran of Peace Now said the expansion would ensure “there is no possibility of any ground continuity at all between Bethlehem and East Jerusalem. If we want to convince the Palestinians to solve problems by talking, not shooting, we should show them that it pays to talk.”