US Vice President Joe Biden says a plan by Israel to build 1,600 homes on the occupied Palestinian land in an East Jerusalem (al-Quds) settlement undermines the efforts to kick-start the Middle East peace process.

"Our administration is fully committed to the Palestinian people and to achieving a Palestinian state which is viable and contiguous," he told journalists after talks with acting Palestinian Authority Chief Mahmoud Abbas in the West Bank city of Ramallah on Wednesday.

The senior American official also leveled harsh criticisms against Tel Aviv over a plan to construct hundreds of new settler homes in annexed East Jerusalem (al-Quds). "It is incumbent on all parties to grow an atmosphere of support for the negotiations and not to complicate them," he noted.

"Yesterday, the decision by the Israeli government to advance planning for new housing units in east Jerusalem undermines that very trust, the trust that we need right now in order to begin as well as produce profitable negotiations," Biden pointed out.

Abbas also condemned the Israeli move, saying, "The Israeli undermines trust and deals a severe blow to efforts deployed over the past months to start indirect negotiations."

Israel's green light to the construction of 1,600 homes in disputed East Jerusalem (al-Quds) drew severe criticism from world countries. America's hopes of kick-starting the Middle East peace process suffered a humiliating setback as the US Middle East envoy, George Mitchell, is trying to revive an indirect dialogue between Palestinians and Israelis after a year of acrimony.

Previous efforts at direct talks have fallen short since Tel Aviv declines to meet the Palestinians' crucial requirement — a comprehensive freeze on all settlement activities in the West Bank settlements.