The US State Department condemned the decision made by the Jerusalem Municipality's Committee for Planning and Building on Wednesday permitting 558 new homes to be built in east Jerusalem.
"Our position on Jerusalem is clear. We oppose any unilateral actions by either party that attempt to prejudge final status issues, including the status of Jerusalem," said State Department spokeswoman Jen Psaki at the daily press briefing in Washington on Wednesday. "We’ve called on both sides to take steps to create a positive atmosphere for the negotiations."
The decision to build new housing units amid contentious ongoing peace negotiations prompted a negative response from the Palestinians.
Hanan Ashrawi, a senior member of the Palestine Liberation Organization, called the moves a "deliberate provocation of the Palestinians to drive them to leave the negotiations."
"Israel is not only capable of sabotaging the talks, but it is flagrantly destroying the chances of peace and stability throughout the region," Ashrawi said in a statement.
US Secretary of State John Kerry has been the subject of recent criticism from Israeli officials in the last week, which has led to friction between Israel and the US as Kerry attempts to broker a peace agreement between Israel and the Palestinians.
In an interview with CNN on Wednesday, Kerry appeared to allude to his military service during the Vietnam War as he played down the criticism.
"I've been attacked before by people using real bullets, not words. And I am not going to be intimidated," Kerry told CNN's Jake Tapper .
Kerry was attacked for mentioning "talk of boycotts" against Israel at the Munich Security Conference on Saturday, provoking the State Department to release an unusual statement imploring Kerry's critics not to distort his words.
Throughout the week, tension grew as a parody video of Kerry's Middle East peace efforts was released, and a group of rabbis wrote a scathing open letter to him claiming that he had "declared war on God."
Spokeswoman Psaki responded to questions during Wednesday's press briefing about an increasingly "poisonous atmosphere" created by these incidents.
"He’s not going to spend a lot of time worrying about words people are using against him," she said. "His greatest concern about this is the impact they have or they could have on the process, that the words aren’t an attack on him, they’re actually an attack on the peace process itself."
In response to a question about a spoof video released by Israeli settlers criticizing Kerry's efforts in the Middle East, Psaki said, "I think it goes in with what I’ve already stated about attempts to mis-characterize his record, his position, his positions on issues, his statements, how that is not an attack on him; that’s an attack on the process. And of course that kind of rhetoric we find unacceptable."
Reuters contributed to this report.