The government has chosen developers to build 486 new apartments in the Pisgat Zeev neighborhood after a yearlong delay over pricing disputes, the state-run land agency said Tuesday.

The announcement came just days after Israel approved up to 455 apartments in the West Bank. Construction plans are continuing even as Israel negotiates with the U.S. on its demand for a total building freeze in both the West Bank and east Jerusalem.

The new buildings are to go up on the outer edge of Jerusalem's northeastern boundary and would narrow the distance between Pisgat Zeev and nearby Palestinian communities.

Jerusalem, with its sites holy to both Jews and Muslims, lies at the heart of the Israeli-Palestinian conflict. Israel captured the eastern sector of the city from Jordan in 1967 and immediately annexed it. The international community does not recognize the annexation or Israel's argument that Jewish neighborhoods there are not settlements.

"While the government of Israel for the sake of the peace process is willing to consider placing severe limitations on construction in the West Bank, that does not apply to Jerusalem," government spokesman Mark Regev said. "The position of the government is that Jerusalem is and will remain the united capital of Israel."

By rebuffing U.S. pressure on settlement construction, Prime Minister Benjamin Netanyahu has solidified the support of his largely hawkish coalition. But the dispute has caused unprecedented tensions with Washington, and the Palestinians have refused to resume stalled peace talks until construction stops.

The Palestinians claim the West Bank and east Jerusalem, along with the Hamas-ruled Gaza Strip, for their hoped-for state. Israel captured all three areas in the 1967 Mideast war, then withdrew from Gaza in 2005. Hamas militants overran that territory two years later.

"People are asking the Americans now: If you could not convince the Israelis to stop settlement activity, will anybody in the Arab and Islamic world believe you can make Israel return to the '67 borders or withdraw from settlements?" asked chief Palestinian negotiator Saeb Erekat.

U.S. Mideast envoy George Mitchell is due in the region later this week to urge Israel to make concessions that would allow peace talks to resume.

Netanyahu has said the newly approved homes are a prelude to a West Bank building slowdown. But the international community has rejected that depiction, especially because Israel says it plans to continue building some 3,000 apartments already approved.

On Wednesday, the European Union expressed its "serious concern" over Israel's approval of settlement expansion. "The European Union reiterates its call on Israel to immediately end settlement activities, including in east Jerusalem," the EU said in a statement.

The selection of developers for the Pisgat Zeev project allows Netanyahu "to engage actively in settlement in Jerusalem (while making) the disingenuous claim that this isn't new," said Danny Seidemann, legal counsel to Ir Amim, an Israeli group that supports coexistence in Jerusalem.

"He is moving in the direction of Obama in the declarative sense. But in the action, he is emptying any future commitment of a settlement freeze of much of its significance," Seidemann said.

About 300,000 Israelis live among about 2.5 million Palestinians in the West Bank and an additional 180,000 live in Jewish neighborhoods of east Jerusalem.