WASHINGTON -- The U.S. sharply criticized Israel's decision to move ahead with a building expansion in East Jerusalem, underscoring the rift between the Obama administration and Israeli Prime Minister Benjamin Netanyahu over how to push forward the stalled Middle East peace process.

The U.S. has unsuccessfully lobbied Mr. Netanyahu over the past nine months to agree to a total Israeli construction freeze in the West Bank and East Jerusalem, to underpin negotiations aimed at creating an independent Palestinian state.

Mr. Netanyahu has committed to significantly limiting new settlement activity in the West Bank but has refused any curtailment of building in East Jerusalem, which Israel annexed following the 1967 Arab-Israeli war.

U.S. officials said Tuesday that Israel's plans to build 900 new housing units in a disputed East Jerusalem neighborhood could further damage Washington's efforts to revive the peace process.

"At a time when we are working to relaunch negotiations, these actions make it more difficult for our efforts to succeed," White House spokesman Robert Gibbs said.

"The U.S. also objects to other Israeli practices in Jerusalem related to housing, including the continuing pattern of evictions and demolitions of Palestinian homes."

Middle East analysts said the White House statement was one of the strongest rebukes of Israeli activities in the disputed territories in recent years. A spokesman for Israel's embassy in Washington declined to respond to the U.S. criticism.

The Jerusalem Planning Committee said Tuesday that it was submitting a plan to build the 900 units in Gilo, a heavily contested East Jerusalem neighborhood. Israel considers Gilo and East Jerusalem legal parts of the Jewish state, while the Palestinian Authority views any construction in these areas as settlements.

President Barack Obama has made the solution of the Arab-Israeli dispute among his administration's most pressing foreign-policy initiatives.

But there are growing signs that the Mideast peace process is at a standstill.

Earlier this month, Palestinian Authority President Mahmoud Abbas said he won't seek re-election, in protest of the U.S. failure to secure an Israeli settlement freeze.

Palestinian officials have also said in recent days they were considering unilaterally declaring an independent state in the next two years, with the aim of gaining United Nations backing. The State Department said Tuesday that the U.S. wouldn't support such a move.

U.S. officials have said in recent days that the Obama administration was continuing efforts to relaunch the peace process, despite the growing political uncertainty inside the Palestinian leadership. These American diplomats have said they might more formally lay out some of the parameters for the talks, to gain Palestinian support. The U.S. continues to press Mr. Netanyahu to more clearly outline his willingness to "restrain" building in the West Bank.

Following the U.S. rebuke of Israel's leadership Tuesday, however, a number of Middle East experts said they feared Mr. Netanyahu and the Palestinians might harden their positions even more.

"Both sides understand it's in their interest to return to negotiations. But the politics now makes it extremely difficult for either side to do so," said Ghaith Al-Omari, a former Palestinian peace negotiator and advocacy director for the American Task Force on Palestine.