Israeli Prime Minister Binyamin Netanyahu on Sunday defended plans for a new Jewish housing development in East Jerusalem, rebuffing the Obama administration's opposition to Israeli construction in the mostly Palestinian area.

"United Jerusalem is the capital of the Jewish people and the state of Israel. Our sovereignty over it cannot be challenged," Netanyahu said in response to questions that U.S. officials raised last week with Israeli Ambassador Michael B. Oren about a 20-apartment project approved this month. "We cannot accept the idea that Jews will not have the right to live and purchase in all parts of Jerusalem."

The Palestinians expect East Jerusalem to form the capital of a future Palestinian state, and the Obama administration has included the area in its demand that Israel stop building beyond the line that divided the sides before the 1967 Arab-Israeli war.

Israel captured that part of the city in the war and subsequently annexed it in a move that has not been recognized internationally.

Netanyahu's comments are the latest blow to President Obama's efforts to relaunch peace talks by persuading Israel, the Palestinians and surrounding Arab states to make concessions. The administration argues that a freeze on building Jewish housing in the occupied West Bank and East Jerusalem would be an important step toward renewing stalled peace negotiations, and Palestinian leaders have said they will not resume talks without it.

Asked about the East Jerusalem project while traveling in India, Secretary of State Hillary Rodham Clinton would not elaborate on the concerns raised with Oren by the State Department last week.

"I'm not going to comment on any specific point within the negotiations. The negotiations are intense, they are ongoing, they are extremely focused, and when we have something to announce, we will do so," she said.

Clinton's criticism earlier this year of Israeli policy in East Jerusalem was among the first signs of a budding conflict with Netanyahu about Israeli construction in areas that are ostensibly part of the negotiations over a future Palestinian state. Palestinians argue that continued Israeli building in East Jerusalem is meant to change the demographics of the area and make it harder for them to establish a capital there.

Oren said that the neighborhood where the building would be located, Sheikh Jarrah, includes several Israeli government and diplomatic buildings and that the project "does not represent any attempt to alter the demographic balance" of the area overall.

Early in July, the city of Jerusalem issued a construction permit for the site of the vacant Shepherd Hotel, a building originally erected in the 1930s for Jerusalem's top Muslim official, according to information from the city administration.

Over the decades, the building passed through British, Jordanian and Israeli government hands. It was bought in 1985 by American investor Irving Moskowitz, an important backer of Jewish projects in East Jerusalem, and leased for many years to the Israeli border police.

In a release, Mayor Nir Barkat's office said the construction plans for the property were reviewed as they would be for a private landowner in any part of the city.

Netanyahu said the larger international dispute did not apply to East Jerusalem. Arabs, he noted, could rent and buy in West Jerusalem, and "I can only describe to myself what would happen if someone would propose that Jews could not live in certain neighborhoods in New York, London, Paris or Rome."