JERUSALEM -- The office of Israeli Prime Minister Binyamin Netanyahu on Tuesday issued a sharp defense of Israeli building in contested parts of Jerusalem, after President Obama said that new construction plans in East Jerusalem were not helpful to peace negotiations.

"Jerusalem is not a settlement - Jerusalem is the capital of the State of Israel," a statement from Netanyahu's office said. "Israel never took upon itself any limits on building in Jerusalem, where 800,000 residents live, including during the 10 months of suspension of building in Judea and Samaria."

The statement was referring to a temporary freeze on new construction in West Bank settlements, which Israel said did not apply to Jewish neighborhoods in East Jerusalem.

The State Department on Monday said it was "deeply disappointed" with Israeli plans announced Monday to build some 1,300 apartments in two neighborhoods in West Bank areas annexed to Jerusalem after the 1967 war. President Obama, who is in Indonesia, said Tuesday that such building is "never helpful when it comes to peace negotiations."

The strong statement by Netanyahu's office came while he is in the United States for talks with administration officials on ways to revive peace talks launched in early September but disrupted by a dispute over continued Israeli building in West Bank settlements and in East Jerusalem. A 10-month Israel moratorium on new building in West Bank settlements expired Sept. 26, and the Palestinians have refused to renew talks while such building continues.

"Israel sees no link between the peace process and planning and building policy in Jerusalem, which has not changed for 40 years," the statement added. "All Israeli governments in the past 40 years have built in all parts of the city. During this period peace agreements were signed with Egypt and Jordan, and for 17 years political negotiations were held with the Palestinians. These are historical facts. Building in Jerusalem never interrupted the peace process."

"The disagreements with the United States over Jerusalem are known," the statement said. "Neither are they new, and they have been going on for 40 years. We hope to overcome them and continue making progress in the political negotiations."

The statement said that Netanyahu was looking forward to his meeting with Secretary of State Hillary Rodham Clinton on Thursday in New York "to advance the peace talks."

Saeb Erekat, the chief Palestinian negotiator, said in a statement Tuesday that the latest Israeli announcement of new construction in occupied territory required the international community to immediately recognize a Palestinian state in the West Bank, Gaza Strip and East Jerusalem.

"If by building settlements, Israel wants to boycott the creation of a sovereign Palestinian state, the world must respond by recognizing the Palestinian state on the 1967 border with East Jerusalem as its capital," Erekat said. "Unfortunately, the international community continues to support a peace process that has nothing of peace and a lot of process. We will not accept the status quo anymore that has only allowed Israel to consolidate its occupation of our land."