The United States and Europe stepped up pressure on Israel to reverse course over new settlement plans that are seen as threatening the viability of a future Palestinian state.
But Israel, whose settlements on occupied or annexed Palestinian land have long been a thorn in the side of peace efforts, insisted it would not back down and laid out revised plans for an additional 1,600 homes.
Israeli settlement plans always raise hackles but Friday's proposals, seen as payback for the Palestinians winning non-member observer state status at the United Nations on Thursday, are considered particularly contentious.
Some of the 3,000 homes are to be built in a corridor of land called E1, an area of the occupied West Bank that runs between the easternmost edge of annexed east Jerusalem and an existing Israeli settlement, Maaleh Adumim.
Palestinians believe construction on E1 will ultimately connect Jerusalem to Maaleh Adumim, largely dividing the northern and southern West Bank and making the creation of a contiguous Palestinian state almost impossible.
Israeli plans for construction in E1 have been in the works since the early 1990s but have never been implemented due to heavy pressure, largely from the United States.
The international outcry since Friday's move has been intense.
France summoned the Israeli ambassador to express its "grave concern" over the settlement plan, while Britain's Foreign Office called in Israel's envoy to "deplore" the decision and urge Israel to reconsider.
Denmark, Spain and Sweden also summoned ambassadors to express deep concern, while UN Secretary General Ban Ki-moon issued an unusually strong rebuke on Sunday, calling the plans a "fatal blow" to the two-state solution.
The US State Department warned on Monday that the E1 area "is particularly sensitive and construction there would be especially damaging to efforts to achieve a two-state solution."
President Barack Obama's spokesman Jay Carney ramped up the pressure on Israeli Prime Minister Benjamin Netanyahu later in the day, directly calling on him to change course.
"We urge Israeli leaders to reconsider these unilateral decisions and exercise restraint as these actions are counterproductive and make it harder to resume direct negotiations," Carney told reporters.
Germany, Russia and Japan also criticized the Israeli plans.
But despite the clamor, Israel dug in and even went further by reviving a plan to construct 1,600 new settler homes in the east Jerusalem neighborhood of Ramat Shlomo.
"Israel continues to insist on its vital interests, even under international pressure. There will be no change in the decision that has been made," a source in Netanyahu's office said earlier.
Palestinian president Mahmud Abbas slammed the Israeli decision, and called on the international community to "take the necessary steps to avoid the collapse of everything," his spokesman Nabil Abu Rudeina said in a statement.
The Ramat Shlomo project caused a diplomatic rift between Israel and Washington when it was first announced in March 2010 during a visit by US Vice President Joe Biden, but it has lain dormant since August 2011.
Ramat Shlomo is a Jewish settlement in the mainly Arab eastern sector of Jerusalem, which Israel seized in 1967 and later annexed in a move not recognized by the international community.
London and Paris rejected media reports that they were planning the unprecedented step of recalling their ambassadors to Israel over the plans, but both made their disquiet at developments known.
"Construction in the E1 area would seriously undermine the two-state solution by isolating Jerusalem... from the West Bank and threatening the territorial contiguity and viability of a future Palestinian state," French foreign ministry spokesman Philippe Lalliot said.
"We have told the Israeli government that if they go ahead with their decision, then there will be a strong reaction," Britain's Foreign Office said, without elaborating.
The plans were resurrected last week following Thursday's UN vote, which dealt a harsh diplomatic blow to Israel while stopping short of granting the Palestinians full statehood.
Former Israeli prime minister Ehud Olmert expressed shock that Israel would make such an announcement, which he told AFP was "certain to offend" Washington after it had shown "courage" by siding with Israel against the UN vote.
Olmert, who stepped down in 2008 over graft allegations, plans to announce Wednesday whether he will run in next month's general election.
The Israeli government has not given details or a timeframe for the new settlement construction.
Israel has also said it will not transfer this month's tranche of millions of dollars of tax and tariff funds it collects for the Palestinians.
Peace talks have been frozen since September 2010 largely over the issue of settlements.