Cabinet Secretary Zvi Hauser's statement illustrated the balancing act that Israeli Prime Minister Benjamin Netanyahu faces as he conducts peace talks in the coming months.

His hawkish government wants construction in east Jerusalem, the section of the holy city claimed by the Palestinians, to continue. But American mediators and the Palestinians want the building halted.

"Building is expected to begin soon in Har Homa ... and Neve Yaakov, where (construction) bids have been issued," Hauser told Army Radio, referring to two east Jerusalem neighborhoods. "Building in Jerusalem is continuing according to its regular pace."

Nonetheless, Palestinians said the project violated the terms of the new peace talks, in which Israel has promised not to take any provocative actions. Palestinian President Mahmoud Abbas said he would address his concerns with the Americans.

"The Americans said some words to us, and they said some words to the Israelis, and now it's up to the US administration to answer such things," Abbas told reporters.

Chief Palestinian negotiator Saeb Erekat said the Israeli position undermined trust-building as the US tries to get the indirect negotiations, or proximity talks, moving.

"The whole concept of proximity talks is to give Senator George Mitchell and US President Barack Obama the chance they deserve," Erekat said. "If they begin doing this (building), I think they will take down the proximity talks."

On Sunday, the anti-settlement watchdog group Peace Now said Jewish settlers had begun work on a 14-unit apartment building in an abandoned police station in Ras Al-Amud, an Arab neighborhood in east Jerusalem. The building is owned by a Jewish group, and the project does not require any government approval unless the residents want to expand the building, Peace Now said.

US Mideast envoy George Mitchell left the region Sunday after completing the first round of indirect peace talks between Israelis and Palestinians -- who resumed negotiations last week after at 17-month hiatus.