A Jerusalem planning body on Monday approved a plan to raze 22 Palestinian homes in east Jerusalem to make room for an Israeli tourist center, a decision that could raise tensions in the divided city and deepen the conflict with the Obama adminstration.

Back in March, Prime Minister Benjamin Netanyahu had pressured Jerusalem Mayor Nir Barkat to hold up the plan so authorities could consult with Palestinians who would lose their homes — a delay that appeared to be aimed at fending off criticism from the U.S.

"Now, after fine-tuning the plan and seeking more cooperation with the residents as far as their needs and improving the quality of their lives, the municipality is ready to submit the plans for the first stage of approval," said Barkat's spokesman, Stephan Miller, before the city's planning commission agreed to the plan.

Final approval, which would require an Interior Ministry green light, could take many more months.

Jerusalem is the most divisive issue between Israelis and Palestinians. Israel annexed east Jerusalem after capturing it from Jordan in the 1967 Mideast war and nearly 200,000 Jews have moved there since, living alongside 250,000 Palestinians in an uneasy coexistence. Palestinians hope to build the capital of a future state in east Jerusalem and see any Israeli construction there as undercutting their claims to the land.

The international community does not recognize Israeli sovereignty over east Jerusalem and the U.S. wants Israel to freeze all Jewish settlement in Palestinian areas, including east Jerusalem, to facilitate Mideast peace talks. It also recently demanded that Israel lift its three-year old blockade of the 1.5 million Palestinians in Gaza.

Israel strained relations with the U.S. in March when it announced plans for additional construction in east Jerusalem as Vice President Joe Biden was preparing to have dinner with Netanyahu.

The plan calls for the construction of shops, restaurants, art galleries and a large community center on the site where some say the biblical King David wrote his psalms. The 22 displaced families would be allowed to build homes elsewhere in the neighborhood, though it is not clear who would pay for them.

Activists who want to block all demolitions issued a statement saying the plan "comes in the general context of (the) fast-track Judaization" of east Jerusalem. It pre-empts "the possibility of Jerusalem ever being a shared city, or indeed capital of a Palestinian state," the statement said. "This in itself precludes peace."

The U.S. Embassy in Israel had no comment.

The prime minister's office said Netanyahu "hopes that since this project is only in a preliminary stage, that the dialogue can continue with those who have built homes on public land and it will be possible to find an agreed solution in accordance with the law."

Barkat had agreed in March to Netanyahu's request for delay to consult Palestinian residents before breaking ground. Israeli demolition of Palestinian homes has in the past provoked harsh reaction from the United States, and no houses have been razed since October.

Although Israel claims it is simply enforcing the law by knocking down illegally built structures, many of the unauthorized homes have gone up because Palestinians have a hard time obtaining construction permits in east Jerusalem.

Barkat says the plan gives a much-needed facelift to Jerusalem's decaying al-Bustan neighborhood, which Israel calls Gan Hamelech, or the King's Garden.

The contested site is a section of a larger neighborhood called Silwan, which is home to some 50,000 Palestinians and 70 Jewish families. Demolitions elsewhere in Silwan have made the neighborhood a hub of tension between Palestinians and Jews.