Middle East Minister Alistair Burt has condemned the expansion of an Israeli settlement in the West Bank.
Authorities in Jerusalem gave final approval to 69 new housing units in Har Homa on Wednesday.
Mr Burt said: "The UK’s position on settlements has long been clear - they are illegal under international law and an obstacle to peace.
“As I set out during my visit to the region earlier this month, both parties need to show bold and decisive leadership to enable US efforts to succeed in bringing the two parties together to direct negotiations without preconditions.
"It is vital that the parties avoid any steps that undermine the chances of success. The consequences of the current efforts not succeeding – for both Israelis and Palestinians – would be very severe.”
Meanwhile, the Israeli State Attorney’s Office has requested authorisation to build a 40-home project in the West Bank settlement of Nokdim.
The High Court issued an injunction against further construction of the homes on Thursday in response to a petition filed by attorney Ghiath Nasser on behalf of the adjacent Palestinian village of Jinata.
The Higher Planning Court has been asked to show their drawings after which there will be a 60-day period for objections to be filed.
It is expected that the issue of West Bank settlements will be one of the talking points between US Secretary of State John Kerry and Israeli Prime Minister Benjamin Netanyahu in further diplomatic talks this week.