Palestinians have threatened UN action after Israel gave its approval on Monday for 1,500 new housing units to be built in annexed East Jerusalem.
President Mahmoud Abbas' spokesman, Nabil Abu Rudeina, told AFP news agency on Monday, that the leadership is about to take "important and necessary measures against Israel's settlement building, including recourse to the UN Security Council, to prevent implementation of these decisions."
The Israeli plan was given authorization by the Urban Planning and Construction Commission on Monday.
According to Israel's interior ministry spokeswoman, Efrat Orbach,developers were asked to trim their request to build 1,600 new housing units in Ramat Shlomo to 1,500 and resubmit it "for final approval".
The project was first announced in 2010 during US Vice President Joe Biden's visit to Israel. But, after causing a diplomatic rift with Washington, the plan has lain dormant since August 2011.
Two weeks ago the Israeli government announced that plans for the housing project had been revived.
Critics say that plans to build housing units in E1, a controversial corridor of land east of Jerusalem, would cut off the northern part of the West Bank from the south and would leave Palestinian areas of Jerusalem surrounded by a chain of Jewish ones, threatening the viability of a future Palestinian state.
Monday's announcement follows Israel's decision last month to plan 3,000 more settler homes in the occupied West Bank and East Jerusalem after the Palestians had their UN status upgraded.