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The decision to approach the United Nations came just days after Israel confirmed it was planning to build more than 1,300 new homes in annexed Arab east Jerusalem.
The news prompted a chorus of international condemnation, led by US President Barack Obama and a furious reaction from the Palestinians who urged the international community to immediately recognise a Palestinian state.
"This latest unilateral Israeli act necessitates dramatic international action for immediate recognition of the Palestinian state (based) on the June 4, 1967 borders," chief negotiator Saeb Erakat said.
Peace talks between the two sides have been teetering on the brink of collapse since the end of September when an Israeli moratorium on West Bank settlement construction ran out.
Since then, the Palestinians have refused to continue talking while Israel builds on land they want for a future state and have called for the building ban to be reimposed.
US-led efforts to prod Israel into reinstating the freeze have so far led nowhere, prompting the Palestinians to repeatedly threaten to seek UN recognition of their state if peace talks fail.
But Israel remained defiant on Wednesday, insisting that construction in the city would never stop.
"There has never been a freeze on construction in Jerusalem and there never will be such a freeze," cabinet secretary Zvi Hauser told public radio.
"Construction will continue in Jerusalem just as it continues in Tel Aviv," he said.
Although the building freeze did not apply to east Jerusalem, Israeli Prime Minister Benjamin Netanyahu had quietly held off approving projects there for most of the 10-month freeze to avoid the political fallout.
Details of the new construction emerged on Monday, a day after Netanyahu flew to the United States to discuss ways to jump start the peace talks.
The storm over east Jerusalem settlement building is expected to be high on the agenda when the Israeli leader and US Secretary of State Hillary Clinton meet for talks in New York on Thursday.
Speaking ahead of their meeting, Clinton expressed disappointment over the Israeli decision but said she remained hopeful that progress could be made.
"We still believe a positive outcome is possible and necessary," she said.
Israel shrugged off the wave of condemnation, with Netanyahu's office saying on Tuesday there was "no connection between the peace process and the planning and building policies in Jerusalem."
But Washington dismissed that argument, with State Department spokesman Philip Crowley saying: "There clearly is a link in the sense that it is incumbent upon both parties... they are responsible for creating conditions for a successful negotiation."
In Jerusalem, visiting US Senator John Kerry warned that the moment for Middle East peace was in danger of slipping away.
"The window of opportunity for a comprehensive peace is closing, narrowing is the best way to put it," he said after meeting with Israeli President Shimon Peres.
"This is a moment for statesmanship, it is a moment to try and define the opportunities and move forward rapidly."
A Palestinian poll published on Wednesday showed that 62 percent of people polled backed the Palestinian position that there should be no resumption of negotiations without a fresh moratorium on settlement building.
The poll, conducted by the Jerusalem Media and Communications Centre, surveyed 1,200 adults from across the West Bank and Gaza Strip in late October, and had a margin of error of three percentage points.
Israel seized east Jerusalem in the 1967 Six Day War and annexed it shortly afterwards in a move not recognised by the international community or the Palestinians, who consider it the capital of their promised state.
The Palestinians see the settlements as a major threat to the establishment of a viable state, and they view the freezing of settlement activity as a crucial test of Israel's intentions.
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The news prompted a chorus of international condemnation, led by US President Barack Obama and a furious reaction from the Palestinians who urged the international community to immediately recognise a Palestinian state.
"This latest unilateral Israeli act necessitates dramatic international action for immediate recognition of the Palestinian state (based) on the June 4, 1967 borders," chief negotiator Saeb Erakat said.
Peace talks between the two sides have been teetering on the brink of collapse since the end of September when an Israeli moratorium on West Bank settlement construction ran out.
Since then, the Palestinians have refused to continue talking while Israel builds on land they want for a future state and have called for the building ban to be reimposed.
US-led efforts to prod Israel into reinstating the freeze have so far led nowhere, prompting the Palestinians to repeatedly threaten to seek UN recognition of their state if peace talks fail.
But Israel remained defiant on Wednesday, insisting that construction in the city would never stop.
"There has never been a freeze on construction in Jerusalem and there never will be such a freeze," cabinet secretary Zvi Hauser told public radio.
"Construction will continue in Jerusalem just as it continues in Tel Aviv," he said.
Although the building freeze did not apply to east Jerusalem, Israeli Prime Minister Benjamin Netanyahu had quietly held off approving projects there for most of the 10-month freeze to avoid the political fallout.
Details of the new construction emerged on Monday, a day after Netanyahu flew to the United States to discuss ways to jump start the peace talks.
The storm over east Jerusalem settlement building is expected to be high on the agenda when the Israeli leader and US Secretary of State Hillary Clinton meet for talks in New York on Thursday.
Speaking ahead of their meeting, Clinton expressed disappointment over the Israeli decision but said she remained hopeful that progress could be made.
"We still believe a positive outcome is possible and necessary," she said.
Israel shrugged off the wave of condemnation, with Netanyahu's office saying on Tuesday there was "no connection between the peace process and the planning and building policies in Jerusalem."
But Washington dismissed that argument, with State Department spokesman Philip Crowley saying: "There clearly is a link in the sense that it is incumbent upon both parties... they are responsible for creating conditions for a successful negotiation."
In Jerusalem, visiting US Senator John Kerry warned that the moment for Middle East peace was in danger of slipping away.
"The window of opportunity for a comprehensive peace is closing, narrowing is the best way to put it," he said after meeting with Israeli President Shimon Peres.
"This is a moment for statesmanship, it is a moment to try and define the opportunities and move forward rapidly."
A Palestinian poll published on Wednesday showed that 62 percent of people polled backed the Palestinian position that there should be no resumption of negotiations without a fresh moratorium on settlement building.
The poll, conducted by the Jerusalem Media and Communications Centre, surveyed 1,200 adults from across the West Bank and Gaza Strip in late October, and had a margin of error of three percentage points.
Israel seized east Jerusalem in the 1967 Six Day War and annexed it shortly afterwards in a move not recognised by the international community or the Palestinians, who consider it the capital of their promised state.
The Palestinians see the settlements as a major threat to the establishment of a viable state, and they view the freezing of settlement activity as a crucial test of Israel's intentions.
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