Middle East Minister Alistair Burt has condemned Israel's announcement of more than 1,000 new settlement units in the West Bank and East Jerusalem.
Plans were announced on Wednesday to construct hundreds of homes for Israeli settlers in 11 areas, including Shilo, Almog and Alon Shevut.
Mr Burt said the British government "condemn the recent decisions taken by the Israeli authorities to advance plans for 1,096 settlement units in the West Bank, and to approve the construction of 63 new units in East Jerusalem.
"Israeli settlements are illegal under international law, undermine trust and threaten the viability of the two-state solution. The UK urges the Israeli authorities to reverse these decisions."
He said Israelis and Palestinians must now focus on negotiations and a two-state solution. Further peace talks are expected next week.
He added: "We urge both parties to continue to show the bold and decisive leadership needed for these efforts to succeed, and to avoid steps that undermine negotiations.
"The need for progress is urgent: we firmly believe the current efforts can bring about the lasting peace that the people of the region deserve.”
The US State Department said it had made its "concerns" known to the Israeli government.