UN Secretary-General Ban Ki-moon expressed "deep concern" on Wednesday about Israel's decision to approve new settler homes in the occupied West Bank and urged the Jewish state to end all such activity.

"Such actions and all settlement activity are contrary to international law and the roadmap," said a statement read out by UN spokesman Farhan Haq.

The 2003 Middle East roadmap drawn up by international mediators calls on Israel to halt settlement expansion in the West Bank and for the Palestinians to rein in militants.

Ban reiterated UN appeals to Israel to "stop all settlement activity, including natural growth" and respond positively to efforts to create conditions for Israeli-Palestinian peace talks.

Israel approved on Monday the building of 455 settler homes, a move opposed by its ally Washington and by Palestinians but which may pave the way for a construction moratorium sought by the United States.

EU External Relations Commissioner Benita Ferrero-Waldner also criticized Israel's continued settlement building on Wednesday, saying it represented the main obstacle to a resumption of the Mideast peace process.

"We have to be realistic and see that this settlement issue is at the moment an issue that blocks the negotiations," Ferrero-Waldner told reporters.

Palestinian negotiator Saeb Erekat said American credibility in the region was at stake. The Palestinians say they will not restart negotiations, which broke down shortly before Netanyahu took office in March, until Israel halts all settlement construction.

"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?" he said.