UN chief Ban Ki-moon on Thursday said Israel's decision to expand a Jewish settlement in east Jerusalem was "not helpful" and he would discuss the matter with his partners in the diplomatic Quartet for Middle East peace.
"The UN position on the illegality of settlements is well known," he told reporters.
"This new tender for 300 new homes in east Jerusalem so soon after this Annapolis Middle East peace conference, I think, is not helpful," he added, referring to a recent US-hosted peace summit.
"I will be discussing this matter with my Quartet partners."
On Tuesday Israel said it had invited bids to build more than 300 new housing units in Har Homa, a settlement in annexed east Jerusalem, which the Palestinians have demanded as the capital of their future state.
Israel does not consider construction in east Jerusalem -- which it captured in the 1967 Six-Day war -- as settlement growth because it annexed the Arab part of the Holy City shortly after the conflict.
But the Palestine Liberation Organization's powerful executive committee issued a statement in which it blasted the expansion project as a "serious violation" and called on the United States and the UN Security Council to put pressure on Israel.
Ban's Quartet partners are US Secretary of State Condoleezza Rice, Russian Foreign Minister Sergei Lavrov and the European Union's foreign policy chief Javier Solana.
The Quartet drafted the so-called roadmap which calls for establishing a Palestinian state living in peace alongside a secure Israel.
The issue was discussed at the US-sponsored conference in Annapolis, Maryland at which Israeli and Palestinian leaders agreed to revive the stagnant Middle East peace process and set the goal of a peace deal and a new Palestinian state by the end of 2008.