The move has angered Palestinians, whose leaders have only recently
agreed to resume indirect contacts with Israel - at Mr Biden's urging.
For
his part, Mr Biden has condemned it as "the kind of step that
undermines the trust we need right now".
The international
community considers East Jerusalem occupied territory.
Building
on occupied land is illegal under international law, but Israel regards
East Jerusalem - which it annexed in 1967 - as its territory.
In
a strongly worded statement, Mr Biden said: "I condemn the decision by
the government of Israel to advance planning for new housing units in
east Jerusalem.
"The substance and timing of the announcement,
particularly with the launching of proximity talks, is precisely the
kind of step that undermines the trust we need right now and runs
counter to the constructive discussions that I've had here in Israel."
He
said the Israelis and Palestinians needed to build an atmosphere to
support negotiations, not complicate them, adding: "This announcement
underscores the need to get negotiations under way that can resolve all
the outstanding issues of the conflict."
Mr Biden said the US
recognised that Jerusalem was a deeply important issue for Israelis and
Palestinians, and for Jews, Muslims and Christians.
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