JERUSALEM, Sept 27 (Reuters) - Israel approved on Tuesday the construction of 1,100 settlement homes on annexed land in the West Bank, complicating global efforts to renew peace talks and defuse a crisis over a Palestinian statehood bid at the United Nations.

The plan was met with a chorus of Western criticism. Britain and the European Union called on Israel to reverse the decision, and U.S. Secretary of State Hillary Clinton said new settlement building would be "counter-productive" to the efforts to revive peace talks.

Palestinian President Mahmoud Abbas applied at the U.N. on Friday for full Palestinian membership, a move opposed by Israel and the United States, which urged him to resume negotiations.

Abbas has made a cessation of Israeli settlement building a condition for returning to talks which collapsed a year ago after Israeli Prime Minister Benjamin Netanyahu refused to extend a 10-month partial moratorium on construction.

The so-called Quartet of international mediators -- the United States, the European Union, Russia and the U.N. -- has called for talks to begin within a month and urged both sides not to take unilateral actions that could block peacemaking.

Saeb Erekat, the chief Palestinian negotiator, said the new housing units Israel wants to build represented "1,100 'noes' to the Quartet statement" urging a resumption of negotiations.

"Israel is challenging the will of the international community with the continued settlement policy," Nabil Abu Rdainah, an Abbas spokesman, said.

The new homes are to be built in Gilo, an urban settlement that Israel erected on land it captured in the West Bank in a 1967 war and annexed unilaterally as part of its declared capital, Jerusalem.

Palestinians want to create a state in the occupied West Bank and the Gaza Strip, with East Jerusalem as its capital, and say settlements could deny them a viable country. Israel cites historical and Biblical links to the West Bank, which it calls Judea and Samaria.

Some 500,000 settlers live in the territory home to 2.5 million Palestinians.

Israel's Interior Ministry said a district planning committee approved the Gilo project and public objections to the proposal could be lodged within a 60-day review period, after which construction could begin.

Despite the new crisis over settlements, Netanyahu held consultations on Tuesday with a forum of senior cabinet ministers about Quartet efforts to try and renew peace talks in the coming weeks, an Israeli political source said.

Palestinian leaders were expected to debate the Quartet's plan on Wednesday.

In New York on Monday, a divided U.N. Security Council met behind closed doors for its first discussion of last week's Palestinian application for full U.N. membership as a state.

The move seems certain to fail due to Israeli and U.S. opposition, despite substantial support by other governments.

Abu Rdainah said it was up to the Security Council to put a stop to Israel's settlement policy "which is destroying the two-state solution and putting more obstacles in front of any effort to bring about a resumption of negotiations".

In London, Britain's Foreign Secretary William Hague said settlement expansion was illegal and "corrodes trust and undermines the basic principle of land for peace. We call on the Government of Israel to revoke this decision."

The European Union's foreign policy chief Catherine Ashton said she deplored the decision, adding: "I call on the Israeli authorities to reverse this plan."

Richard Miron, spokesman for U.N. Middle East envoy Robert Serry, called Israel's decision "very concerning".

Clinton said the Israeli decision was "counter-productive to our efforts to resume direct negotiations between the parties.

"As you know, we have long urged both sides to avoid any kind of action which could undermine trust, including, and perhaps most particularly, in Jerusalem, any action that could be viewed as provocative by either side," she told reporters at a news conference.

(Writing by Jeffrey Heller; Additional reporting by Tom Perry in Ramallah and Justyna Pawlak in Brussels; Editing by Rosalind Russell)