Nabil Abu Rudeineh, spokesman for Palestinian President Mahmoud Abbas, called on the international community to intervene and put a stop to Israel's building plans, the official Palestinian Web site WAFA reported.
"The Israeli decision contradicts efforts to revive the peace process," Rudeineh said.
The new housing units announced by Israel's Ministry of Construction and Housing Sunday are part of a plan to construct an additional 5,000 units within Israeli borders, CNN said.
"Some countries won't be pleased with this but they won't be surprised," Ariel Atias, Israeli minister of construction and housing, was quoted as saying by Ynetnews.com.
Atias said a decision to approve the construction plans was made last month after the Palestinian Authority was accepted as a full member of UNESCO.
Atias said the new housing would "alleviate the shortage of housing units designated for young couples in Israel -- with an emphasis on the capital, Jerusalem," Ynetnews.com said.