A Defence Ministry official said architects and contractors appeared before a subcommittee of the military-run Civil Administration in the West Bank and registered their plans for construction in the E1 corridor near Jerusalem, a preliminary step before any building permits are issued.

Angered by the U.N. General Assembly's de facto recognition of Palestinian statehood on Thursday, Israel announced the next day it would build the new dwellings for settlers, on land near Jerusalem that Palestinians seek for a future state.

The decision by Prime Minister Benjamin Netanyahu's pro-settler government to build houses in E1 for the first time raised the alarm among Palestinians and in world capitals.

Israeli housing on the corridor's barren hills could bisect the West Bank, cut off Palestinians from Jerusalem and further dim their hopes for an independent and contiguous state.

"E1 is a red line that cannot be crossed," Palestinian President Mahmoud Abbas told reporters in the West Bank city of Ramallah.

The subcommittee of the Civil Administration's Higher Planning Council convened hours before Netanyahu was due to visit Germany, where he faces a dressing down from Chancellor Angela Merkel over the settlement project.

Netanyahu, stopping in Prague to thank the Czech Republic for voting last week against upgrading the Palestinians's status to non-member state at the U.N., reiterated that he remained committed to a two-state solution with the Palestinians.

Peace should entail "a demilitarised Palestinian state (that) recognises the one and only Jewish state of Israel", he said, citing two Israeli conditions Palestinians have balked at.

Netanyahu, favoured to win a Jan. 22 general election with the backing of right-wing voters, has rejected calls by the United States and Europe to reverse course over settlements, which most countries consider illegal.

"Israel will not sacrifice its vital interests for the sake of obtaining the world's applause," he said in the Czech capital.

Israel's housing minister has said construction work in E1 will not begin for at least a year. Commenting on the subcommittee's session, the defence official said it was a "procedural, preliminary stage".

EU MEASURES

In Brussels, European Union ambassadors responsible for security issues discussed the possibility that all EU states would write to Israel to express their displeasure over the settlement expansion plans or summon Israeli envoys for consultations, as five EU countries have already done.

No formal decisions were taken during the EU meeting and the issue will be discussed further on Friday, EU diplomats told Reuters.

Israeli analysts said Netanyahu hoped to solidify right-wing support by promoting settlement activity in the run-up to the parliamentary election, even at the risk of Israel's diplomatic isolation.

U.S.-sponsored Israeli-Palestinian talks collapsed in 2010 in a dispute over settlement building, and Abbas pressed ahead with his unilateral move at the United Nations over U.S. and Israeli objections and calls to return to the negotiating table.

"Our conflict with the Palestinians will be resolved only through direct negotiations that address the needs of both Israelis and Palestinians," Netanyahu said in Prague. "It will not be resolved through one-sided resolutions at the U.N. that ignore Israel's vital needs and undermine the basic foundations of peace."

Israel cites historical and Biblical links to the West Bank and East Jerusalem, territory captured in a 1967 war and where some 500,000 Israelis and 2.5 million Palestinians now live. Palestinians fear settlements will deny them a viable state.