Israel's decision to build 1,100 settlement homes on West Bank land is counter-productive to reviving peace talks with the Palestinians, U.S. Secretary of State Hillary Clinton said on Tuesday.

The decision appears to make it even less likely that the two sides will answer a call on Friday by the European Union, Russia, the United Nations and the United States, collectively known as the Quartet, to resume peace talks within a month.

"We believe that this morning's announcement by the government of Israel approving the construction of (1,100) housing units in East Jerusalem is counter-productive to our efforts to resume direct negotiations between the parties," Clinton told reporters at a news conference.

"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 added.

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.