Israel on Wednesday revealed plans to build new homes on West Bank land it has annexed as part of its Jerusalem boundaries, a move likely to further hamper any resumption of peace talks with the Palestinians.

The plan to build 625 homes in the urban area of Pisgat Zeev adjacent to Arab East Jerusalem was approved by an Israeli Interior Ministry committee last week, some two years after it was originally proposed, Israel Radio said.

The plan will probably hinder U.S. efforts to revive direct Israeli-Palestinian peace talks, which were launched on Sept. 2 but suspended by Palestinians after Israel refused to extend a partial freeze on West Bank settlement building on Sept. 26.

Israel has insisted that building in the urban areas it annexed to Jerusalem following their capture in a 1967 Middle East war were never included in the freeze. Its move to annex the West Bank land has not won international approval.

Pisgat Zeev, founded 25 years ago, is one of its largest Jewish "neighbourhoods", as Israel refers to it, with some 50,000 inhabitants.

But despite Israel's insistence on exempting Jerusalem from the freeze, building plans in the city were quietly put on hold after an embarrassment with Washington over tenders disclosed during a visit by U.S. Vice President Joseph Biden in March.

A spokeswoman for the Israeli rights group Peace Now, which monitors Jewish settlement building, has estimated that settlers hold some 13,000 construction permits throughout the West Bank issued before Prime Minister Benjamin Netanyahu announced the 10-month freeze a year ago.

Netanyahu announced the freeze to coax Palestinian President Mahmoud Abbas into direct talks but these ground to a halt after Israel refused to extend it despite diplomatic pressure from its main U.S. ally.

Israel says the settlement issue should be resolved in discussions about future borders and not be a precondition for talks.

Palestinians charge that continued Jewish settlement-building in the occupied West Bank undermines their chances of establishing a viable state with contiguous territory. They want East Jerusalem to be its capital but Israel also claims the city to be its own undivided eternal capital.

Some 500,000 Israelis live in the West Bank and East Jerusalem among 2.5 million Palestinians.