The Jerusalem municipality on Wednesday green-lit construction of 130 homes in the Gilo neighborhood of Jerusalem.
The units will be in a 12-story tower block in Gilo settlement, city councilor Pepe Alalu told AFP.
The city council also approved plans to build a tourism center in the City of David, called Silwan by Arab residents.
Fakhri Abu Diab, head of the Silwan Committee for defending Palestinians' Land and Homes, told Reuters Israel was "attempting to change the demographic reality of the Palestinian neighborhood."
Israel's government decided to ramp up construction in Jerusalem on November 1 after a series of unilateral moves by Palestinian Authority officials at the United Nations that violated the bilateral Oslo Accords.
On Dec. 20, representatives of Britain, France, Germany and Portugal lined up to criticize Israel's "settlement activity" saying it was undermining attempts to breathe life into the moribund peace process.
"One of the themes that emerged was the severely damaging effect that increased settlement construction and settler violence is having on the ground and on the prospects of a return to negotiations," the four European Union said in a joint statement.
Israeli officials responded saying the Security Council focus on Israel rather than countries where unrest and bloodshed was occurring would cause them to "lose their credibility and make themselves irrelevant.”
The US State Department spokeswoman Victoria Nuland joined Israel in criticizing the Security Council, saying, "The best way to deal with this issue is a direct dialogue between the parties and reaching an agreement on borders."
"Shouting from the rooftops of the Security Council is not going to change the situation on the ground. The sides should get back to the table and solve the problems together, and that's the way we will have a lasting, stable peace," she added.
Israel has agreed to a Quarter for Middle East Peace proposal aimed at talks without preconditions that would result in a final status agreement by 2012.
PA officials, however, have placed numerous preconditions on talks with Israel known to be unacceptable to officials in Jerusalem as a means of avoiding talks that would require them to make compromises.
Israel previously froze construction in Judea and Samaria for 10-months to meet PA demands only to be given additional preconditions – namely, the release of all terrorists from Israeli jails and acceptance of the pre-1967 borders as a basis for talks.
Last week the PA said it planned to downgrade all bilateral ties with Israel, would persist in its unilateral tack at the United Nations, and would return to 'popular resistance.'
It also announced that Hamas and its terror confederates in Gaza would be inducted into the PLO.
The PLO, like Hamas, continues to maintain that 'armed resistance' is the only path to an 'indivisible Palestine' – which leaves no room for the Jewish state.