A Palestinian worshipper who was prevented from reaching the Al Aqsa Mosque prays outside Occupied Jerusalem's Old City while Israeli forces stand guard in the background. Image Credit: AP

Occupied Jerusalem: Israeli media reported on Monday that the US is pressing Israel to scrap a contentious east Occupied Jerusalem building project whose approval has touched off the most serious diplomatic feud with Washington in years.

Top US officials have lined up in recent days to condemn the Israeli plan to build 1,600 apartments in east Occupied Jerusalem, the sector of the holy city that the Palestinians claim for their future capital.

The project caused a storm in Washington because it was announced during US Vice President Joe Biden's visit to the region last week, badly embarrassing the US and complicating its efforts to restart Israeli-Palestinian peacemaking.

Benjamin Netanyahu has officially apologised, but Palestinians and Arab analysts will have none of it. They say the Israeli prime minister's statement of regret at the announcement of colony-building plans, during Biden's visit, was actually a ploy to calm the angry international community.

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The Palestinians immediately threatened not to join upcoming US-brokered talks meant to jumpstart negotiations after a 14-month breakdown.

US officials have not disclosed what steps they want Israel to take to ease the crisis, and Israeli government spokesman Mark Regev refused to comment Monday. But Israeli newspapers and radio stations said Washington wants the construction project canceled.

They also reported that the US wants Israel to make a significant confidence-building gesture toward the Palestinians.

Suggestions included releasing hundreds of Palestinian prisoners held in Israeli jails" turning over additional areas of the West Bank to Palestinian control" removing some of the roadblocks hampering the movement of Palestinians and goods in the West Bank" and easing the blockade on the Hamas-ruled Gaza Strip, media reported.

Washington, they added, also has demanded that Israel officially declare that talks with the Palestinians will deal with all the conflict's big issues, including final borders, the status of Occupied Jerusalem, and the fate of Palestinian refugees who fled or were driven from their homes during the war that followed Israel's 1948 creation.

The unusually harsh US criticism has undercut Israeli Prime Minister Benjamin Netanyahu's efforts to suggest that the crisis had passed.

Israeli newspapers reported on Monday that Israel's ambassador to Washington, Michael Oren, told Israeli diplomats in a conference call Saturday night that their country's relations with the US haven't been so tense since 1975.

The Foreign Ministry had no immediate comment.

East Occupied Jerusalem, home to Muslim and Jewish holy sites, historically has been the most explosive issue dividing Israelis and Palestinians.

Israel annexed the territory after capturing it in the 1967 Middle East war but the Palestinians and the international community have not recognized that move and consider the Jewish neighborhoods Israel has built there to be illegal colonies.

Although previous Israeli leaders have agreed to the principle of sharing the disputed holy city, Netanyahu objects to partitioning Occupied Jerusalem and wants to keep the city united under Israeli control.

He also exempted east Occupied Jerusalem from a November order limiting colony construction for 10 months. The order, issued under intense U.S. pressure, applies only to the West Bank.

The Palestinians want the West Bank, east Occupied Jerusalem and the Hamas-ruled Gaza Strip to be part of their hoped-for state.

With input from Jumana Al Tamimi, Associate Editor