Prime Minister Benjamin Netanyahu on Tuesday backed off controversial plans for potential construction of thousands of new homes on the West Bank, including development of a contentious area outside of Jerusalem, the Associated Press reported.
The plan announced by Israel's Housing Ministry earlier in the day, prompted a Palestinian threat to walk out of Mideast peace talks. U.S. officials said they were blindsided by the Israeli announcement and demanded an explanation.
In a statement issued late Tuesday evening, Netanyahu said the plan would make "no contribution" to settlements and would only hurt the cause.
He said the announcement had caused "unnecessary conflict" with the international community just at a time when Israel is trying to rally pressure to halt Iran's nuclear program.
The statement said his Housing Minister Uri Ariel had accepted the request.
The Palestinians claim the West Bank, east Jerusalem and the Gaza Strip, territories captured by Israel in 1967, for an independent state. They say Israeli settlement construction on the lands they claim is a sign of bad faith.
More than 500,000 Israelis now live in the West Bank and east Jerusalem. Israel withdrew from Gaza in 2005. The international community, including the U.S., rejects settlements as illegal or illegitimate.
In Washington, State Department spokeswoman Jen Psaki said the White House had been caught off guard by the earlier announcement to study settlement expansion.
"We were surprised by these announcements, and are currently seeking further explanation from the government of Israel," she said.
"Our position on settlements is quite clear - we do not accept the legitimacy of continued settlement activity. We've called on both sides to take steps to create a positive atmosphere for the negotiations," she added.
Under heavy U.S. pressure, the Palestinians dropped a longstanding demand for a halt in settlement construction and agreed to renew peace talks with Israel in late July after a nearly five-year break.
To lure the Palestinians back to the table, Israel agreed to release 104 of the longest-serving Palestinian prisoners, all convicted in violent attacks on Israelis. The Palestinians also say they received assurances that settlement construction would be constrained.
Both sides have said the negotiations have made no progress. The situation deteriorated further late last month when Israel announced plans to build thousands of new homes in the West Bank and east Jerusalem.
In an interview broadcast on Israeli and Palestinan TV last week, U.S. Secretary of State John Kerry said continued settlement construction raised questions about Israel's seriousness about pursuing peace. Saeb Erekat, the chief Palestinian negotiator said there have been no negotiations for the past week.