The plan's approval by the Jerusalem District Planning and Construction Committee on Sunday sparked a row, just two weeks before Netanyahu is scheduled to meet with US President Barack Obama.
"This is a very initial procedure," the Prime Minister's Office said in a statement. "The plan will face discussions and objections both at the municipality's local committee and at the Interior Ministry's district committee, where the residents' stand will be presented."
As part of the controversial plan, 22 illegal houses will be demolished and 66 other buildings will receive an approval for construction in the eastern part of the neighborhood. The demolished houses will be replaced by an archaeological garden.
The Meretz faction in the Jerusalem Municipality submitted its official resignation from the coalition following the plan's approval. "We are deeply disappointed with the mayor and his policy. His desire to always make international headlines has turned into an obsession and the 'King's Garden' plan proves it," the faction said in a statement.
In his statement, Netanyahu expressed his hope that the dialogue with the owners of the building built illegally on public property would continue and that an "acceptable solution" would be found.
Barak: 'King's Garden' can wait
Defense Minister Ehud Barak addressed the matter on Sunday as well, saying that it could be delayed "if the political circumstances require." He said he planned to discuss the matter with the prime minister.
Speaking after a meeting with United Nations Secretary-General Ban Ki-Moon in New York, Barak told his associates that "'King's Garden,' which has been waiting to be built for 3,000 years, can wait three more months or three more quarters if the political circumstances and Israel's favor require. It's a matter of common sense."
State officials in Jerusalem said Sunday night that the prime minister was unauthorized to intervene in Jerusalem's planning and construction procedures. Other officials said that due to his role as chairman of the Israel Land Council, the prime minister had a say on all planning and construction issues.
Several months ago, Netanyahu asked Jerusalem Mayor Nir Barkat to try to present to the planning authorities a plan which would be acceptable to all parties and postpone the discussion on the Silwan garden which was scheduled to take place three months ago. The discussion was indeed postpones, but the mayor failed to reach an agreement with the neighborhood's residents.
The residents, on their part, presented their own plan to the local committee. The plan's supporters said it would allow the completion of 66 of the houses built in the eastern part of the compound and would help receive permits for their construction.
They added that owners of the 22 buildings located on the western side of the complex would be able to build their houses legally in open areas on the eastern side.