Israeli planners on Wednesday gave final approval for 558 apartments in Jewish settlements in war-won east Jerusalem, which is sought by the Palestinians as a capital, officials said.

Palestinian officials said the decision undermines fragile U.S.-brokered negotiations with Israel on setting up a Palestinian state alongside Israel.

Also Wednesday, Israel’s chief peace negotiator rebuked fellow government ministers who have criticized U.S. Secretary of State John Kerry for his mediation efforts, pointing to widening divisions in Israel’s center-right governing coalition.

The Jerusalem municipality said its planning committee approved building permits in the neighborhoods of Har Homa, Neve Yaakov and Pisgat Zeev, built on land Israel captured in the 1967 war and later annexed. Most of the international community considers them illegal settlements.

Brachie Sprung, a municipality spokeswoman, said the building projects received initial approval a few years ago, and that new building in Arab areas of Jerusalem was also approved Wednesday.

Chief Palestinian negotiator Saeb Erekat said Israel is undermining Kerry’s efforts. “The international community must hold Israel accountable for this policy,” he said.

Lior Amihai of the Israeli settlement watchdog group Peace Now said the new approvals are “shameful” at a time when negotiations are in a sensitive stage.

Israeli government spokesman Mark Regev had no immediate comment.

More than 550,000 Israeli settlers live in the West Bank and east Jerusalem. The Palestinians want to establish a state in those territories as well as the Gaza Strip, all captured by Israel in 1967… see more