[Updated 5:34 p.m.] White House Press Secretary Robert Gibbs echoed Biden's condemnation at a briefing in Washington.
"I don't believe that either the substance or the timing [of the announcement] is particularly helpful, and I think [it] runs counter to the very productive talks the vice president was having in the region," Gibbs said.
[Updated 3:34 p.m.] Vice President Joe Biden said Tuesday that the United States condemns Israel's decision to build new housing units in a Jerusalem neighborhood, calling it "a step that undermines the trust we need right now."
"I condemn the decision by the government of Israel to advance planning for new housing units," Biden said in a statement issued just hours after he met with Israeli leaders in the region.
"The substance and timing of the announcement, particularly with the launching of proximity talks, is precisely the kind of step that undermines the trust we need right now and runs counter to the constructive discussions that I've had here in Israel."
Israel announced plans earlier Tuesday to build 1,600 housing units in Jerusalem, but denied the new construction is in East Jerusalem - a sticking point in the Mideast peace process.
[Posted 1:32 p.m. ] Israel said Tuesday it would build 1,600 new housing units in a Jerusalem neighborhood, but denied the new construction is in east Jerusalem - a sticking point in the Mideast peace process.
However, lead Palestinian negotiator Saeb Erakat said the Israeli government is "determined to undermine" efforts to jump-start peace negotiations, calling the plan "a disaster."
The Israeli Interior Ministry said it would build the new housing units in the Ramat Shlomo neighborhood, located on the east side of the Green Line in disputed territory. The line separates the borders of Israel as delineated by the United Nations from territory Israel captured in 1967 in the Six-Day War.
The announcement Tuesday came amid visits to Israel by U.S. Vice President Joseph Biden and George Mitchell, the Obama administration's special envoy for Middle East peace.
Mitchell said Monday that Israeli and Palestinian leaders had accepted indirect talks aimed at restarting direct talks. Negotiations between the two sides have been stalled for over a year.
In announcing those indirect talks, Mitchell encouraged both sides to refrain from any statements or actions that could inflame tensions or prejudice the outcome of the talks.
"It is a disaster," Erakat said in response to the plan. "We have a determined government in Israel, that is determined to undermine Mr. Senator Mitchell. They are determined to undermine the Obama administration's efforts to revive peace ... It can't be tolerated."