US Secretary of State Hillary Rodham Clinton spoke with Israeli Prime Minister Benjamin Netanyahu Friday to express 'strong objections' to plans to build housing units in occupied East Jerusalem.

The dispute opened up a rare diplomatic rift between the US and Israel, as the announcement for the new construction came while Vice President Joe Biden was in Israel and as Washington had brokered indirect talks between the Israelis and Palestinians.

Clinton told Netanyahu over the phone that 'the US considered the announcement a deeply negative signal about Israel's approach to the bilateral relationship and counter to the spirit of the vice president's trip, and to reinforce that this action had undermined trust and confidence in the peace process and in America's interests,' State Department spokesman P.J. Crowley said.

Biden had issued a statement hours after the announcement while still in Israel Tuesday, harshly condemning the plans to build 1,600 housing units in East Jerusalem.

The US opposes any new settlement activity in the occupied territories, and the Palestinians have demanded a halt to construction as a condition for returning to the negotiating table. Following the announcement, the Palestinians threatened to withdraw from the hard-sought indirect discussions.

Clinton 'made clear that the Israeli government needed to demonstrate not just through words, but through specific actions, that they are committed to this relationship and to the peace process,' Crowley said.

The Israeli government said the announcement was not meant to be timed with Biden's visit and described it as a bureaucratic mishap by Jerusalem's District Planning and Construction Committee, which did not require approval from the prime minister's office before making the announcement.

The State Department did not entirely accept that explanation.

'We accept what Prime Minister Netanyahu has said,' Crowley said. 'By the same token, he is the head of the Israeli government and ultimately is responsible for the actions of that government.'

President Barack Obama has identified renewing the Israeli-Palestinian peace process as a top priority and his diplomatic team has invested considerably in getting it back on track. Special envoy George Mitchell has made numerous trips to the region and is scheduled to return again next week.

Meanwhile, Washington was working to contain the fallout from the construction plans. Mitchell and Assistant Secretary Jeffrey Feltman have been on the phone with Palestinian President Mahmoud Abbas, and the foreign ministers of Egypt, Jordan, Qatar and the UAE in an effort to prevent the Palestinians from backing out of the talks.

'We jointly remain committed to this process, acknowledging that, obviously, it is a difficult environment given the Israeli statement,' Crowley said.