Prime Minister Benjamin Netanyahu on Monday said that Israel would continue to build in Jerusalem in the same way that it has over the last 42 years, Haaretz reported.
"The building in Jerusalem - and in all other places - will continue in the same way as has been customary over the last 42 years," said Netanyahu at a Likud party meeting.
Israel drew angry reactions from the U.S. and the Palestinians by announcing last week the construction of 1,600 new housing units in the East Jerusalem neighborhood of Ramat Shlomo during a visit by U.S. Vice President Joe Biden last week.
Netanyahu did not specifically address the diplomatic crisis with the U.S.over Israel's announcement about the East Jerusalem construction.
However, when asked by MK Tzipi Hotovely what would happen in September, when the 10-month settlement freeze ends, Netanyahu responded that construction would continue unabated.
Under U.S. pressure, Netanyahu imposed a limited moratorium on new housing starts in West Bank settlements in November but excluded Jerusalem from the 10-month partial freeze.
Also on Monday, in a speech to the Knesset to welcome Brazilian President Luiz Inacio Lula da Silva, Netanyahu said the construction of homes for Israelis in the city's eastern sector in no way hurts Palestinians.
In his speech, Netanyahu gave no indication he would cancel the project or limit construction in East Jerusalem.
"For the past 40 years, no Israeli government ever limited construction in the neighborhoods of Jerusalem," he said in a speech to the Knesset, citing areas in the West Bank that Israel captured during the 1967 Six-Day War and annexed to the city.
Netanyahu called on the Palestinians, who have said they would not restart peace negotiations unless the project was scrapped, not to place new preconditions on the revival of the talks.
He added that there was nearly total consensus among Israeli political parties that what he called Jewish neighborhoods in and around Jerusalem would remain "part of the state of Israel" in any future peace agreement.
Palestinians say Israeli settlement in the West Bank will deny them a viable state in the West Bank and Gaza Strip. They claim East Jerusalem to be the capital of a future state.
Meanwhile, Defense Minister Ehud Barak earlier on Monday urged the government to work toward defusing the diplomatic crisis over Israeli construction in East Jerusalem and getting peace talks with the Palestinians back on track.
The government must make an effort in order "for this crisis to be forgotten and for the proximity talks, and later direct talks, to return to the right path," said Barak at a Labor party meeting.
Barak said he met with American officials about the necessary steps to move forward.
"Peace talks are a first priority for Israel and for the entire region," said Barak. "The political process is in the interest of the state and it is a subject in which the Labor party believes. It is one of the things that anchors us in the government and drives us to work within it."