Israel has begun construction on some 60 new housing units in Jewish settlements in Occupied East Jerusalem, anti-settlement Peace Now group said Monday. "The works aim to build 60 housing units for Orthodox religious Jewish families right next to the Palestinian neighborhood of Arab al-Sawahra," Peace Now spokeswoman Hagit Ofran told AFP.

"The works began two months ago as part of development of East Talpiot," one of a dozen Jewish settlements that Israel has built in Occupied East Jerusalem since capturing that part of the city in 1967, she said.

"They aim to complete a belt of Jewish neighborhoods that will surround [Occupied] East Jerusalem and we are against this project, which is harming the hopes for peace," she said.

The Jerusalem municipality says that the construction in the neighborhood was approved in 2000 and that the works in question do not amount to a new settlement.

Palestinian President Mahmoud Abbas' spokesman Nabil Abu Rudeina said in a statement on Monday that the continuation of settlement activity "is part of the occupation government's policy to avoid the two-state solution and the peace process."

Israeli settlements in Occupied East Jerusalem - the area which Palestinians hope to make the capital of their promised state - are one of the main stumbling blocks in the moribund Middle East peace process.

Israel captured East Jerusalem in the 1967 war, and has illegally occupied the city ever since. All settlements built on occupied Palestinian land are illegal under international law.

Israel annexed Occupied East Jerusalem in a move that has not been recognized by the international community. All foreign embassies are located in Tel Aviv.